Tehran Stock Exchange Services Company (TSESC) is a subsidiary of the Tehran Stock Exchange (TSE).  TSESC was established on June 1994 as an independent company owned by TSE and its members.  The TSESCs main function is to develop, maintain, operate, and promote systems for all stages of the trade-cycle services in Iran in order to attain highest level of efficiency and meet international standards.   Specifically, TSESC is responsible to: 

-         Provide clearance, settlement, and information services for all securities traded in Tehran Stock Exchange (TSE) and other organized markets

-         Provide custody and asset services as the Central Securities Depository of Iran

-         Maintain all hardware and software used for trade and post trade activities of TSE and other organized markets in Iran

-         Develop and enhance existing software applications to address ever changing TSE requirements

-         Provide consultancy and technical advice to all Exchanges or interested organizations for trade and post-trade activities

-         Function as the National Numbering Agency of Iran

TSESC has operating facilities in multiple locations throughout the country.

TSESC started its operation as a subsidiary of the National Informatics Corporation (NIC) of Iran in July 1984.  Originally, TSESC developed, maintained and operated the computerized system of TSE used for trade and post-trade activities.  In June 1994, TSESC was incorporated as an independent company under the ownership of the TSE, its members, and NIC. Currently, TSE and its members are the sole owners of TSESC.  Additional services have been added to the list of its services since its incorporation as an independent company.

TSE and its member brokerage companies own TSESC.  TSE is the majority shareholder and few brokerage companies own a small percentage of shares at TSESC.

TSESC is administrated by a Board consisting of five Directors: representatives of the TSE and member brokerage companies. 

Managing Director of TSESC attends board meetings.

Since TSESC operates as the Central Security Depository of Iran, the Bourse Council regulates its functions and oversees its activities.  Bourse Council is the highest regulatory authority of Exchanges in Iran. The Minister for Economic Affairs and Finance presides over the Council and its members include state officials, private sector representatives, and specialist. 

TSE specifies the rules related to the clearing and settlement procedures where these rules are in accordance with the Councils regulations. TSESCs operations also comply with these rules. 

TSESC complies with existing governmental regulations for incorporated companies.

Participants of the TSESC are the members of the TSE: brokerage companies, institutional investors, listed companies, and finally market makers.

TSESC currently operates a direct holding system where each individual retail or institutional investor has an account for depository and custody purposes.

Trading Services

Maintain Automated Trading System (ATS)

Provide comprehensive list of trading services

Disseminate trade information to interested parties

Clearing and Settlement Services

Handle clearing and settlement of trades taking place in TSE for the equities and corporate bonds issued by the listed companies

Facilitate book-entry for transfer of the securities

Maintain an Investor Named-Based (Direct Holding) system

Issue certificates after the settlement of each trade

Operate sites in other cities throughout the country

Depository, Custodial, and Entitlement Services

Issue certificates after depository

Manage deposits and withdrawals

Develop and maintain a registrar system used by listed companies

Process hereditary, legal, and other transfers

Maintain and block for trading pledged securities

Handle Corporate Actions (act as registrar and paying agent)

Information and Supporting Services

Provide services for the operation of the TSE and other organized markets

Provide account transfer information

Provide numbering services

Disseminate trade and investor information to listed companies

Disseminate trade and transfer information through a BBS

Manage operational risks

Report on trade and post-trade activities

List shareholder and general meetings

Maintain a dynamic website www.tsesc.com  used by investors and listed companies

Other Services

Provide consultancy and technical services for TSE and other organized Exchanges in Iran

Manage the trading and CDS data centers

Develop, produce, contribute, monitor, maintain and commercially utilize specialized software and products

Manage specialized projects of technological modernization

At present securities eligible for trade are: Equities and Corporate Bonds.

TSE has plans to introduce new financial instruments including financial and commodity derivatives, exchange traded mutual funds and Real Estate Investment Trusts (REITs) in the near future.  TSESC would be responsible for all post-trade activities for these new instruments.

Large percentage of equities is in immobilized form and also a smaller percentage is in dematerialized form.  In addition, certain numbers of investors still hold physical securities that are not tradable in this form and should be deposited and immobilized before being sold.

Corporate Bonds are in physical form and should be deposited before trading.

A direct holding system is being operated where each individual investor is identified for all trade and post-trade activities and also corporate actions.

Investors who still hold to their physical certificates need to deposit them at TSESC before trading is allowed.  This depositary process where certificates become immobilized is performed through member brokers.

After the depository process or each trade an announcement is printed for the investor that shows his or her inventory in a listed company as well as the deposited and tradable amount.

Listed companies receive a list of their shareholders where their shares have been deposited and trade transactions on daily basis.

-         Centralized depository and registry

-         Delivery versus payment (DVP Model 2)

-         Book entry for securities transfer

-         Multilateral netting on cash

-         T+3 rolling settlement

-         Centralized Counter Party (CCP) (A true CCP is planned to be implemented in the near future; at the moment TSESC does not guarantee the trades.)

-         Short selling is not allowed (sellers inventory is checked at order entry and blocked until final settlement)

-         Trade commissions, taxes and other charges are cleared and settled during the settlement cycle

Settlement cycle is T+3 for equities.  For corporate bonds, the settlement cycle is also T+3; however, the funds are transferred on T+1. 

The settlement cycle may be reduced with the developments under going in TSE and TSESC.

Settlement Deadlines:

Currently, no short selling is allowed and sellers inventory is checked, blocked and allocated after order entry and trade matching. 

The buyer is the beneficiary of Corporate Actions that occur between T and T+3.

Both securities delivery and cash payment occur on T+3; and the buyer can trade the purchased shares afterwards.

Equities settlement

-         Securities sold are blocked on T after order entry and consequently until the finalization of the trade on T+3.

-         Delivery versus payment BIS model 2 is processed on T+3 with multilateral netting on cash and final transfer of securities.

-         TSESC is responsible to maintain both trading and post-trade solutions and both solutions interact and communicate in real-time.

-         Debtor brokers have to clear with TSE before 10:00 am on T+3; they issue a check in order to TSE.  TSE issues a check for the creditor brokers before 2:00 pm. 

-         TSESC has plans to use the new payment system of Central Bank of Iran (CBI) to enhance the cash settlement procedure outline above.

Corporate bond settlement

-         On August 2005, the first corporate bonds issued by a listed company were sold to the public.  Other listed companies in TSE have also plans to issue corporate bonds for funding their expansions. Only bonds issued by listed companies can be traded in TSE.

On T+3, debtor brokers are expected to fulfill their cash obligations by issuing a check in order of TSEs Clearinghouse before 10:00 am.

The TSEs Clearinghouse issues a check in order of creditor brokers before noon on T+3.

TSESC has plans to enhance the efficiency of the cash settlement procedure and use the payment system of the Central Bank of Iran (CBI) for payments associated to trades occurred in TSE and other organized markets in Iran.

Short selling is not allowed at TSE and there are no risks associated with securities shortages.  The inventory of seller is checked at order entry for availability of securities.  The plan is to relax this control with the implementation of a new trade and post-trade solutions

For defaults on cash, the trade associated to the defaulting counterparty is separated from other trades during settlement cycle.  The counterparties define terms of settlement of these trades outside the regular settlement cycle.  TSESC does not act as a CCP at the moment; however, TSESC would start acting as a CCP in mid 2008.

TSE and TSESC do not provide any credit related services at the time being.

A Lending and Borrowing (LNB) has been planned to be introduced for equities traded in TSE in the near future.

TSESC is the National Numbering Agency of Iran, authorized to assign ISIN codes (ISO 6166) and CFI codes (ISO 10962) to securities and other financial instruments issued in Iran.

TSESC is a member of Association of National Numbering Agencies (ANNA), responsible for the implementation of the international standards for securities and other financial instruments.

TSESC has applied for membership to the International Organization of Securities Commissions (IOSCO).

TSESC maintains all software applications used for trade and post-trade processes. 

The core of the applications used currently was developed by a Canadian software company called EFA Software Services Ltd.

TSESCs team develops and maintains certain functionalities in-house and also has an operational application marketed for registrars that are mostly a department of listed companies.

TSESC is in the process to implement new trade and post-trade solutions for TSE. ATOS-Euronext Market Solution (AEMS) has been selected as the provider of these solutions