Market regulation plan or the destruction of the commodity exchange?

According to Tejarat News, a group of capital market activists, in a letter, requested the entry of the Article 90 Commission of the Parliament into the matter of the opposition of the Industry Commission and the Ministry of Privacy to the government’s opinion and to prevent the adverse effects of the “plan to regulate the market of goods subject to the obligation to be offered in commodity exchanges” on the economy as a whole. and were listed.

Online economy wrote: It was on July 13 of this year that Majid Eshghi, the head of the Securities and Exchange Organization, sent a letter to Mohammad Baqer Qalibaf, the Speaker of the Islamic Council, demanding the withdrawal of the plan to regulate the market of goods subject to the obligation to be offered on commodity exchanges from the agenda of the parliament and refer this plan to The Economic Commission and its addition to the plan to amend the law of the securities market after the fundamental reforms and the removal of ambiguities.

The title of this plan, which previously was the steel chain development and sustainable production plan with the approach of reforming market regulation policies, has been changed to the regulation of the market of goods subject to the obligation to supply in commodity exchanges, in order to continuously regulate the market of goods subject to the obligation to supply in commodity exchanges. including the steel chain, basic metals, gas and petrochemicals, oil and hydrocarbon materials and gas condensates and petrochemical and refining products have been approved.

Capital market activists/stock market people are worried

Following this issue, a group of capital market activists in a letter addressed to Hasan Shujaei, Chairman of the Parliament’s Article 90 Commission, pointed out the negative effects of this plan on the economy and the capital market as a whole and stated: Ma’aden Majlis has been approved under the title “Plan for regulating the market of goods subject to the obligation to be offered in commodity exchanges” and the evidences in the process of drafting the plan and the proposed contents have caused concern about the spread of corruption in executive bodies and the spread of golden signatures.

Making decisions for the capital market without the presence of a representative of this market!

Even though in the initial plan of the Parliament’s Industries and Mines Commission, the presence of a representative of commodity exchanges was considered, in the new proposal, commodity exchanges do not have any representatives, and the members of the 9-member working group of the said plan have been selected while the Ministry of Security has played a prominent role in It makes decisions about the supply of goods in commodity exchanges, and in a way, all the powers related to Iran’s commodity exchange are assigned to the Ministry of Security.

Continuing to pursue the plan in the Industries Commission and the Ministry of Security despite the government’s opposition

It should be noted that the plan to regulate the market of goods subject to the obligation to be offered in commodity exchanges was proposed and opposed by the Council of Ministers in the seventh session of July this year. However, the Ministry of Security and the Parliament’s Industries and Mines Commission are still pursuing the approval of this project in the public arena.

Contrary to Article 53 of the Constitution

According to Article 53 of the Constitution, all government receipts are concentrated in the accounts of the general treasury and all payments are made within the limits of credits approved by law.

Meanwhile, according to the plan for regulating the market of goods subject to the obligation to be offered in commodity exchanges, the amount of duties on the export of goods is determined by the proposal of the head of the working group, who is the Minister of Security, and 100% of the revenue from this article is transferred to the special account of the Ministry of Security or The relevant device is deposited with the treasury of the whole country.

Mohammad Ali Mohammadi, a capital market expert, reviewed the plan to “regulate the market of goods subject to the obligation to be offered in commodity exchanges” and said: This plan is extremely ill-considered and not only does it not solve the problem, but it can cause irreparable damage to industries and the capital market. .

He added: It is obvious that if the prices of the Iran Commodity Exchange are lower than the price determined as a result of the actual supply and demand, it will have a negative effect on all the shares and issuers of the stock exchange that offer their products in the Commodity Exchange, and it will even become a subject. Such a plan puts the capital market at risk.

Working in parallel with the responsibilities of the Ministry of Economy and the Supreme Council of the Stock Exchange

Mohammadi clarified: According to the Securities Market Law, the highest authority of the capital market is the Supreme Council of the Stock Exchange, which is a subsidiary of the Ministry of Economic Affairs and Finance, and the Minister of Economy is the head of the Supreme Council of the Stock Exchange.

In the mentioned plan, powers will be assigned to the Ministry of Security, which will create problems for the capital market due to interference in the council’s responsibilities and powers.

(It should be noted that in this plan, a working group with the same composition as the members of the Supreme Council of Stock Exchange and Securities will be formed to continuously regulate the market of goods subject to the obligation to be offered in commodity exchanges.

Meanwhile, based on Articles 4 and 7 of the Securities Market Law, these two working groups have similar duties in order to regulate the market, and this issue will affect the regulatory structure and capital market pillars.)

Regarding this issue, Mohammadi said: The Supreme Council of the Stock Exchange is considered the highest pillar of the capital market, and no other body or organization can impose an obligation on the stock market.

On the other hand, the head of the Supreme Council of the Stock Exchange is the Minister of Economy, and if this plan is implemented, the Minister of Economy as the head of the Stock Exchange Council cannot be held accountable to the shareholder whose goods the Ministry of Privacy has priced. Also, if it is to be monitored, it is the responsibility of the Ministry of Economy, the Supreme Council of the Stock Exchange, etc.

(At the same time, commodity exchanges are one of the types of self-regulating organizations that according to Clause 5, Article 4 of the Securities Market Law, issuing their activity license is the responsibility of the Supreme Council of the Stock Exchange, and supervising their performance and approving their statutes is also one of the duties of the Stock Exchange Organization.)

Threat to the independence of the commodity exchange/restrictions on exports and entry of currency into the country

Mohammadi stated: Commodity exchange is a platform for conducting transactions, price discovery and formation of supply and demand, and it does not follow orders. On the other hand, this plan endangers the independence of the Iranian Commodity Exchange.

In addition, according to this plan, export duties will be imposed on products by this committee, which makes predictability of production and export difficult for companies.

In fact, it will be possible to saturate the domestic market in the short term at the cost of losing export markets, which will certainly not be sustainable.

Meanwhile, if there is a price difference between domestic and foreign goods, the incentives for smuggling and informal export will increase.

This capital market expert noted: It should also be noted that, unfortunately, the observance of property rights has been neglected in policy-making in recent years, and policymakers make decisions instead of private sector activists. This issue has caused that the motivation for long-term investment and productive economic activity in the country is not very promising.

For example, a manufacturer who has a long-term export commitment and has concluded a long-term contract with foreign customers despite all the obstacles, including sanctions and difficult competition with international competitors, cannot be forced to offer all products on the commodity exchange, or be charged for it. be established to justify the export.

In a situation where the country needs access to stable foreign exchange sources, creating new ambiguity by a committee, in addition to the possible damages of canceling the export contract for producers, can also be considered as a threat to the country’s export earnings.

unmeasured plans; The factor of capital market volatility

Mohammadi stated: On the other hand, one of the reasons for the instability of the capital market in recent months is the creation of plans similar to the aforementioned plan, which follow the policy of suppressing prices, controlling supply and demand, etc. A commodity will most likely have a negative effect on the stock market.

He clarified: Every time a price ceiling is imposed on the Iran Commodity Exchange with the slogan of supporting and regulating the market, the supply of raw materials for real producers is far worse and the role of brokers or pseudo-producers also increases, and in the end, there is no effect on the price paid. There is no final consumer.