Monetary and Capital Market Exclusive, March 2004

The Broker’s Organization of Tehran Metals Exchange is a nongovernmental, non-commercial and non-profit institute, with an independent, legal personality. This is an Iranian organization, headquartered in Tehran, and can, with the permission of the Stock Exchange Council, establish representative offices in the country or overseas.

According to the article of association, the activities carried out by the Metals Exchange can be summarized as follows:

- Creating well-organized primary and secondary markets, so as to facilitate purchase and sale of financial instruments, futures and options in the metals market.

- Creating order and introducing regulation in the metals market.

- Developing the metals market.

- Providing relevant information and conducting statistical market analysis.

- Disseminating prices in line with the relevant guidelines.

- Close surveillance over the flow of activities and also over the relationships of brokers and clients.

- Regulating relationships between brokers, by facilitating the flow of information among them with due consideration to keep the confidential information confident.

- Closely supervising the commission fees for various kinds of services and professional advise.

- Oversight over the primary valuation of financial instruments introduced in the market.

- Cooperation with domestic and foreign exchanges in order to update the members and clients with useful information and developments.

- Immediate dealing with possible irregularities and arbitration among brokers themselves or between brokers and clients, in accordance with the pertinent regulations.

- Aquiring facilities to carry out the objectives of the organization.

- Using the excess funds of the organization for investment purposes, with the discretion of the board of directors.

- Engaging in any other necessary or useful activity on the direction of the board of directors in achieving the objectives of the article of association.

>>>>> Various Contracts in the TME

All transactions carried out in the metals exchange comply with the standard norms and are generally of five types:

1. Cash Transactions: These contracts are drawn up at the behest of market activists and based on their bids. In this contract the purchaser is required to pay the whole amount, along with the commission fee, in cash, and the seller has to deliver the goods within a maximum period of three days.

2. Forward Contracts: In such contracts, the buyer pays the whole amount at the time of purchase and the seller delivers the metal at a specified date.

3. Credit Transactions: Here the metal is delivered to the customer at once, and the amount is paid on the due date.

4. Futures Contracts: These are binding obligations according to which the supplier of metal pledges at the time of contract to provide the buyer with the standard metal on the due date and the buyer also acts accordingly. In case each one of them is found in breach of the obligation a penalty is imposed.

5. Options: These are of two types; namely call and put options.

>>>>> Manner of Transactions

Each transaction in the metals exchange is carried out as follows:

1. In the first stage, the customer presents the purchase/sale order to the broker, who, in turn, will reflect the order in the trading floor.

2. In the second stage, the customer's order is carried out in the trading floor market.

3. After the transaction is carried out, the third stage starts, in which transaction data are processed, and after that the clearing house prepares reports including the status of the required margins, daily settlement and commission fees. These are sent to the brokers' offices.

4. In the final stage, the clearing house settles its accounts with the brokers and they in turn settle their accounts with the customers.

>>>>> Metals Traded in the TME

According to the ratification of the registration board, at present three metals, namely steel, copper and aluminum are dealt in the exchange market:

1. Copper in the form of 8mm wire staples and slabs and its alloys.

2. Aluminum in the form of 6, 7, 8 and 10 inch billets, also A413 and 380.3 alloys and 1000 p pure bars, 50 p bars and Tbars.

3. Steel in different size iron bars, slab bars, billet bars, and blooms.

The lots transacted at the metals exchange must not be less than 20 tonnes in case of copper and aluminum and 220 tonnes in case of steel.

Transactions regarding other metals such as gold, lead and zinc are under study and after approval of the registration board will be traded in the market.