Procedures of Securities Transactions on Iran Farabourse

In applying the article 5 of the Executive By-Laws of the Securities Market Law and upon recommendation of Iran Farabourse Company on April 6, 2009, the present regulations comprising 20 chapters, 123 articles and 27 notes were approved on Aug. 29, 2009 by the Securities and Exchange Organization board of directors.

Chapter One: Terms and Definitions

Article 1: The definitions provided for the terms used in article 1 of the Securities Market Law of I.R.I ratified in November 2005 by the Parliament (National Consultative Assembly) and in the Regulations on Securities Listing and Offering on the Iran Farabourse Company shall also apply for the purposes of the terms used herein while other terms are defined as follows:

Offering advice means a notice which is published by Farabourse prior to the conduct of a major transaction as per the format approved by the Farabourse board of directors and pursuant to the standards prescribed herein.

Trading Post/Station means the broker’s trading area which is liaised with the Farabourse trading system.

Ordinary Market includes the trading system markets in which the ordinary transactions on securities are executed in accordance with the rules herein.

Halting of Symbol means prevention of transactions on any type of securities as per the rules in force.

Auction means a mechanism for securities trading based on the optimum matching of the customers’ purchase and sale orders with a priority in price, origin and timing.

Continuous Auction means an auction which is continuously put up and during which entry, change and cancellation of orders shall be allowed. In continuous auctions, the purchase and sales orders shall result in striking a deal as soon as the price adjustment is accomplished.

Discontinuous Auction means an auction which is put up at the stage of order-taking after the orders have been entered and the transaction is executed through the trading system on the basis of theoretical opening price.

Official Trading Session means a specific period in each business day during which the transaction is allowed to be executed as per the rules. The Farabourse is permitted to have more than one official trading session during a single trading day.

Collective Purchase means purchase of securities by the broker under the code of group transactions which is allocated to the customers’ ownership code after the trades by the broker.

Daily Price Limit means the fluctuation range of tradable Securities on Farabourse which is established in proportion to the reference price and the daily entry of orders are merely authorized in this range.

Purchase/Sale Application means the customer’s request along with the requirements thereto implying the purchase or sale of securities which is presented to the broker in the form of electronic or non-electronic forms. Such application may be presented to the broker containing the fixed price, limited price or the price which is to be set by the broker. 

Order-Taking Period means a period of accepting orders prior to the discontinuous auction during which the brokers may enter, change or cancel orders in the trading system.

Trading Day means the business days during which the transactions on Farabourse are carried out as per the rules in force. 

Prorata Method based on the prorata method, the securities allotted for each order equivalent to the volume of registered orders are divided by the total registered orders and multiplied by total securities eligible to be offered.

Trading System means an electronic system through which operations related to the Farabourse transactions including receipt of orders, matching and trading are carried out.

Base Capital means the total shares, stock dividends and rights issue of the company which are at the stage of subscription or lawful registration. 

Order means the applications for purchase or sale of securities which are entered in the trading system by the broker.

Stop Order means an order which is activated on the basis of the last market deal price. With respect to the purchase orders, the stop order shall be activated when the last market deal price is equal to or higher than the price set by the customer. With respect to the sale orders, the stop order shall be activated when the last market deal price is equal to or lower than the price set by the customers. 

Central Depository Company means the Central Securities Depository and Settlement Company (a public joint stock entity). 

Initial Offering means the first offering of securities after listing and entering in the Farabourse. 

Initial Offering by Auction means an offer made at a trading session on the basis of buyers’ competition.

Farabourse means Iran Farabourse Company (a public joint stock entity).

Closing Price means the price of each security which is calculated at the end of each official trading session and announced by ” Farabourse “.

Base Price means the minimum price for offering shares in bulk deals which is set by the seller and is reported to Farabourse through the seller’s broker in his application for bulk deals.

Offering Price means a price for each point of security which is entered in the trading system by the broker.

Reference Price means a price which serves as a basis for the exercise of the daily price limit of securities. 

Theoretical Price means a price which is calculated after considering the effect of capital changes and/or distribution of cash profit on the closing price.

Opening Theoretical Price means a price which, at the opening stage, is calculated by the trading system by using auction mechanism on the basis the registered orders and the transactions of opening stage are carried out at such price.

Collective Transactions Code means a code which has been defined on the trading system for entering the collective orders of each trading post.

Volume Limit means the maximum number of securities entered in the trading system in the course of each order.

Negotiation means the process of security quoting and pricing by brokers through electronic or non-electronic links.

Customer/Client means a person who is applicant for purchase or sale of securities.

Block Deal means a deal in which the number of shares and tradable rights issue for the companies whose base capital exceeds one billion shares is higher than or equal to half and lower than one percent of the capital base and for the companies whose base capital is lower than or equal to one billion shares is higher than or equal to one and lower than five percent of the capital base.

Bulk Deal/Transaction means a deal in which the number of shares and rights issue in the companies whose base capital exceeds one billion shares is higher than or equal to one percent of the base capital and in the companies whose base capital is lower than or equal to one billion figure, is higher than or equal to five (5%) percent.

Conditional Bulk Deal means a deal in which the settlement is rendered in conformity with the conditions laid out in the offering advice as per the rules described herein.

Rules and Regulations mean the requirements which have been stipulated by the competent authorities within the scope of their powers and the Farabourse, broker, customers and other parties concerned shall have to abide by them.

  Trading Symbol means a code which has been exclusively defined for each one of the securities on the trading system. This code may be in the form of characters, numbers or a combination of both.

LOT means a specific number of securities that the order entered in the trading system must be a multiplier of it and the quantity of each security shall be determined by the Farabourse board of directors.

Chapter Two: General Requirements for Securities Trading

Article 2: All transactions on the Farabourse market shall be carried out as per the rules herein and at the official trading session.

Note: The conduct of transactions off-the-trading session shall be allowed with the approval of the SEO’s board of directors and in accordance with the conditions set forth by this board.

Article 3: The official trading session of various securities on the Farabourse, begins at 9 A.M. on Saturdays through Wednesdays per week and closes at 12 noon of the same day with the exception of official holidays. 

Article 4: Changes in hours and days for carrying out transactions and the official trading sessions shall be allowed with the approval of the Farabourse board of directors. Such changes shall be made public by Farabourse at least three business days before they take effect.

Article 5: The Farabourse shall be authorized to change the starting and finishing hours and duration of trading sessions if any technical problems come up in the trading system. Such changes shall, immediately and in a manner deemed appropriate, be made public. The Farabourse shall have to retain the evidence relating to the technical problems of the trading system in its archives. 

Chapter Three: Stages of Transactions

Article 6: The securities transactions on the Farabourse shall take place in the primary, secondary and third markets and participation certificates market respectively. The stages of transactions in the primary, secondary and participation certificates markets are accomplished as follows:

Pre-Opening Stage which happens for 30 minutes before the start of transactions. It is possible to enter, change or delete orders by brokers in the course of this stage but no transactions whatsoever can be effected.

Opening Stage happens immediately after the pre-opening stage by executing the orders available in the trading system and on the basis of discontinuous auction mechanism.

Continuous Auction Stage happens after the opening stage during which the transactions are conducted on the basis of continuous auction mechanism.

Closing Discontinuous Auction Stage happens immediately upon termination of the continuous auction stage for 15 minutes. It is possible to enter, change or delete orders by brokers during the course of this stage but no transaction whatsoever can be achieved. At the end of this stage, transactions are carried out by executing the orders available in the trading system and on the basis of discontinuous auction mechanism.

Closing Stage happens for 15 minutes before the end of trading session during which it is possible to enter orders and execute transactions merely at closing price.

Note: In the Farabourse tradings all or a number of the foregoing stages are used to conduct a transaction. The Farabourse board of directors shall have to designate the stages of executing a transaction in each market and notify the public at least 3 business days before they take effect. 

Chapter Four: Types of Orders

Article 7: The types of orders entered in the trading system are as follows:

Limit Order means a purchase or sale order which is executed at the price set by the customer or better than that.

Market Order means an order which has been entered in the trading system without any price and is executed at the price of the counterparty’s best order. If a fraction of the order is not executed, the remainder shall stay on the trading system as a single order at market price.

Market to Limit Order means an order which may enter the trading site only during the continuous auction stage. Such order is entered in the trading system without price and is executed at the price of the counterparty’s best order. If a fraction of the order is not executed, the remainder shall stay on the trading system as a limit order at the last transaction price.

Market on Opening Order means an order which may enter the trading system only during the pre-opening stage. Such order is entered in the trading system without price and is executed over the opening stage at the opening price. If a fraction of the order is not executed, the remainder shall stay on the trading system as a limit order at the opening price.

Stop Loss Order means a stop order which is changed to market order when it becomes active (gets activated).

Stop Limit Order means a stop order which is changed to limit order at the price already fixed in the order when it becomes active (gets activated).

Article 8: The orders, in terms of the execution modality, fall into the following types:

Cross Order means an order by which the broker may simultaneously enter and execute the purchase or sale order with the same volume and at the same price. The price of such order shall be higher than or equal to the price of the best purchase order entered in the trading system and lower than or equal to the price of the best sale order entered in the trading system. Such order may enter the trading system only at the continuous auction stage.   

Iceberg Order means a purchase or sale order which includes two open and hidden portions. The open portion stands in the line of purchase or sale and is visible and verifiable but the hidden portion remains inactive. The volume of the open and hidden portions shall be determined by the broker. If the total open portion of the order is executed, the hidden portion shall, at the rate of the open portion, become active and stand in line for execution. The minimum total order and the minimum volume of open portion in the iceberg order shall be determined by the Farabourse  board of directors.   

Fill and Kill Order means a limit order which shall immediately, after entry, be executed. If all or a fraction of it is not executed, the remainder shall automatically be deleted from the trading system. It is not possible to enter this order at the pre-opening stage.

All or None Order means a limit order the execution of which is subject to the total order transaction. If the total order transaction is not possible immediately after entry, the order shall automatically be deleted from the trading system. It is not possible to enter this order at the pre-opening stage. 

Article 9: The period of orders validity shall expire as follows:

Day Order means an order the validity of which shall expire at the end of the trading day and then it will automatically be deleted from the trading system.

Trading Session Order means an order the validity of which shall expire at the end of trading session and then it will automatically be deleted from the trading system.

Good Till cancel Order means an order which shall remain to be valid on the trading system until when it is deleted by the broker.

Good Till Date Order means an order the validity of which shall expire at the end of the date specified at the entry time of order and then it will be deleted from the trading system.

Time Order (Sliding Validity) means that the broker shall, at the entry time of order fix a number of specific days (times) for the validity of order. Such order shall, until the date being equivalent to entry date of order plus the specified days (times), remain valid and then it will be deleted from the trading system.

Article 10: The priority of orders in the trading system, according to the type of order is as follows:

A) Market order and market to limit order

B) Market order at opening price 

C) Limit order

Chapter Five: Halting and Re-Opening of Trading Symbol

Article 11: The Farabourse shall, upon the notice given by the SEO, have to halt the security trading symbol. The circumstances which may result in the halting of the trading symbol include:

at least one day prior to convention of the shareholders’ general meeting and before the board meeting during which resolutions are to be made with respect to the powers delegated by the extraordinary general meeting concerning the capital increase;

a material change in the information which has already been announced to Farabourse by the company or issuer of the listed securities and/or existence of new material information; 

disclaimer or modified comment by the auditor on the financial statements and records.

at least one day before the periods of paying dividend and final maturities of various participation certificates and certificates of deposit.

Article 12: The trading symbols which are halted upon the notice given by the SEO, shall be reopened merely by the SEO’s agreement.

Article 13: The Farabourse shall, until the end of the business day at the latest, have to disseminate information along with the reasons for the halt of the trading symbol. Accordingly, the Farabourse shall, at least 15 minutes prior to reopening of the trading symbol, have to make the matter public.

Chapter Six: Price Limits and Volume Limit

Article 14: The daily price limit in the primary, secondary and participation certificates markets of Farabourse shall be five (5%) percent for the securities without market-maker. Should there be a market-maker, such price limit shall be specified as per the market-making contract. The trading symbols in the third market shall not be subject to the daily price limit. 

Note: The subsequent changes in the daily price limit shall, upon the proposal made by the Farabourse board of directors, be approved by the SEO board of directors. The changes in the price limit shall have to be disclosed by Farabourse one business day before such changes take effect.

Article 15: At the time of reopening the trading symbols which have been halted on the grounds of material disclosure, the daily price limit shall take effect up to the limit of 50% as the case may be and with the SEO’s approval. This trend shall continue until the end of the day that the transaction volume of company’s shares, in the accumulated form as of the reopening day, is reached at least 0.0004 of the company base capital and the price limit shall take effect from the official trading session thereafter. As long as the price limit is open-end share, the daily price shall be adjusted appropriate to the transactions volume executed during that day in proportion to 0.0004 of the company’s base capital and shall be computed as the closing price of that day. 

Note: The SEO shall be authorized to raise the daily price limit as per this article under special circumstances.

Article 16: The closing price of trading symbols in the primary, secondary and participation certificates markets of Farabourse shall be equal to the weighted average price of the transactions executed by symbol during the trading session in the ordinary market.

Article 17: The reference price for the symbols without market-maker shall be the closing share price of the previous day. The reference price for the symbols with market-maker, in the case of declaring a price by the market-maker, shall be the declared price and, in case of non-declaration, shall be the closing share price of the previous day.

Article 18: The base point of order is equivalent to one. It shall be possible to change the base point of order with the approval of the Farabourse board of directors by disclosing it at least one business day before it takes effect.

Article 19: The volume limit shall be equal to 50 thousand shares for the symbol of the companies whose base capital is equal to or exceeding one billion shares and 10 thousand shares for the symbol of other companies. It shall be possible to change the volume limit with the approval of the Farabourse board of directors by disclosing it at least one business day before such change takes effect.   

Note: The volume limit for other securities shall be determined by the Farabourse board of directors and the related changes shall be disclosed at least one business day before such changes take effect.

Chapter Seven: Canceling Transactions

Article 20: The Farabourse managing director shall, not later than the office hours of the business day for holding the trading session, cancel the securities transaction under the following circumstances:

the broker’s statement indicating an oversight and proof of its occurrence by the Farabourse managing director;

the transactional error arising from the problems in the trading system;

the shares transaction; exceeding or being equal to five percent (5%) for the companies whose base capital is lower than or equal to one billion shares or rights issue, and the shares transaction, exceeding or being equal to one percent for the companies whose base capital is higher than one billion shares, executed in one trading session and through one trading code without compliance with the requirements for bulk transactions;

non-compliance with the stated quota for securities sale and purchase in accordance with the prevailing rules which shall lead to cancellation of the broker’s aggregate sales or purchases.

Note: Under special circumstances and at the discretion of the Farabourse managing director only the sales and purchases in excess of the quota shall be cancelled.

Other issues are handled as per the rules and approvals of the Organization. 

Chapter Eight: General Provisions Governing the Bulk Transactions

Article 21: The bulk transactions are executed in a separate market which has been created on the trading system for this purpose. In such transactions, the price limits and volume limit shall not apply. 

Note: In order to execute bulk transactions, the stock symbol shall stay open in the ordinary market.

Article 22: The offer in the bulk transactions shall take place in the form of a package and from one trading code and/or pursuant to the rules approved by the SEO’s board of directors.

Article 23: In order to execute bulk transactions, the seller’s broker shall have to submit his written application for the sale of shares or rights issue along with the following information and evidence to Farabourse:

the number of shares or rights issue qualified for offering

the base price for offering

date of offering

the name of offerer along with the copy of sales order

the sales conditions including the payment in cash or by installment of the deal price and, in case of the sale by installment, the manner of payment and required collaterals

the maximum period for settling the cash portion and presenting out-of-clearing settlement document

evidence supporting the offerer’s agency to transfer the financial and non-financial rights in shares

disclosing the attendant conditions specified in the contract if the contract is produced by the seller

further information as requested by Farabourse.

Article 24: The application to offer shares or rights issue lower than five percent of the base capital shall, at least by 10 a.m. of the business day prior to offering, have to be registered with the Farabourse secretariat and in case of the conformity of the offering advice with the regulations, the matter shall be publicly disclosed at the discretion of the Farabourse managing director by 12 noon of the same day at the latest.

  

Article 25: The application to offer shares or rights issue for five (5%) percent of the base capital or higher than that shall, at least, by 12 noon of four business days prior to offering and the application to offer shares or rights issue for 50% or higher than that shall also at least 7 business days prior to offering, have to be registered with Farabourse secretariat and in case of the conformity of the offering advice with the regulations the matter shall be publicly disclosed at the discretion of the Farabourse managing director by the end of the same business day through the Farabourse official website.

Article 26: The conditions set forth by the seller’s broker shall not be subject to any alteration after the offering advice has been published by Farabourse. If the conditions in the offering advice change or if the seller withdraws from selling shares or rights issue, the bulk transaction shall not take place and the conduct of transaction shall be subject to the seller’s application for the second time. Under the circumstances, the matter shall be referred to the authority in charge of investigating the brokers’ violations and pursuant to Farabourse notice, the shares or rights issue shall remain non-tradable until when the absolute and final verdict has been issued.

Article 27: If the seller wishes to publish a notice of sale in newspapers, the information included in such notice shall not be inconsistent with the information supplied to Farabourse. If there is any inconsistency, the information posted on the Farabourse official website shall prevail.

Article 28: The Farabourse shall have to leave open the bulk transaction symbol up to one hour at the latest after the start of trading session.

Article 29: The minimum change in the authorized price of each order in the bulk transaction is the same as that of the ordinary market.

Note: The Farabourse managing director shall, in view of the market situation, be permitted to modify the minimum change in the authorized price of each order for the next trading session. Nonetheless, the matter shall be made public before the start of the next trading session.

Article 30: Each broker shall only be entitled to receive the purchase order from a single buyer and enter into competition.

Article 31: A broker in a bulk transaction shall not be permitted to simultaneously operate in both the offering and bidding positions.

Article 32: In the bulk transactions, the number of shares or rights issue in each purchase order shall be equal to the number of shares and rights issue specified in the offering advice. Accordingly, the price fixed in the purchase orders shall not be lower than that of the base price.

Article 33: The reduction in the purchase order price entered in the trading system or entry of the order at a price lower than the highest purchase order entered in the trading system shall not be permitted and deletion of the purchase order shall be merely permitted if the purchase order has been entered at a higher price in the trading system.

Article 34: The seller’s broker shall, in case of entering purchase order in the trading system at the base price or higher than that, have to make the offer prior to 5 closing minutes of the trading session. The offer by the seller’s broker shall be possible only when at least 3 minutes has passed from the time of entering the best purchase order in the trading system.

Note 1: In case of entering the purchase order during the 5 closing minutes of the market hours, the continuation of competition shall be postponed to the next trading session and the broker with the best purchase order shall have to enter its/his order in the trading system at the same price in the beginning of the next trading session.

Note 2: Non-compliance with the previsions of this article by the buyer’s or seller’s broker shall be considered violation and the Farabourse shall have to refer the matter to the authority in charge of investigating the brokers’ violations for inquiries.

Article 35: If the buyer’s broker or the seller’s broker prevent the conduct of transaction, the violator shall have to pay the counterparty one (1%) percent of the transaction value at the base price as compensation. In this respect, the broker shall be entitled to receive, the required collaterals or guarantees, as the case may be, from the buyer or the seller. Accordingly, if the transaction is not executed under the rules in this article, the offending broker shall have to pay the handling charges based on the transaction value at the base price to the SEO, Farabourse and Central Depository Company.

Chapter Nine: Conditional Bulk Transactions

Article 36: In the conditional bulk transactions, the buyer’s broker shall be entitled to enter the order in the trading system when he/it unconditionally receives from the client an equivalent of three (3%) percent of the shares value or rights issue covered in the transaction at the base price in cash or by letters of guarantee and shall, as the case may be, deposit the amount so received in the account of the Central Depository Company or deliver it to this company and then submit the certification of the said company supporting the receipt of related guarantees to Farabourse. 

Note 1: If the buyer’s broker fails to fulfill its/his settlement obligations, the deposit referred to covered in this article shall be paid into the account of the seller’s broker as compensation upon deduction of handling charges and the costs thereto.

Note 2: If the buyer’s broker reports his/its withdrawal in writing from continuing the competition after submission of the purchase application and before execution of transaction, or where the buyer’s broker is unable to accomplish the deal, his deposit shall, within two business days at the latest after the withdrawal date or conduct of transaction, be refunded upon the approval of Farabourse managing director indicating that the broker’s actions are not inconsistent with the applicable rules for the transaction.   

Article 37: The buyer’s broker shall, within 90 business days at the latest after conduct of transaction, have to settle the cash portion of deal through the clearing house of the Central Depository Company and shall, within 8 business days after conduct of transaction, deliver the related documents to issue out-of-the-clearing settlement document of the non-cash portion. The seller’s broker shall have to submit the out-of-the clearing settlement document to the Farabourse and the Central Depository Company after receipt of the required documents to issue out-of-the clearing settlement document within 9 business days at the latest after conduct of transaction. If the cash portion is deposited and the out-of-clearing settlement document is delivered to the Central Depository Company within 9 business days at the latest after conduct of transaction, the transaction entry in the trading system shall take place until the end of the next business day at the latest.

Note 1: If the seller’s broker or the seller refuses to receive the documents stated in this article, the buyer or the buyer’s broker shall be permitted to submit the foregoing documents to the Central Depository Company for filing in records against a receipt.

Note 2: If the shares are offered by the Privatization Organization to carry out a bulk transaction, it shall be possible to extend the deadline for setting the cash portion and out-of-the clearing settlement document within 30 business days upon the notice given by the Privatization Organization.

Note 3: If, for payment of the cash portion of the deal, the seller’s broker fixes a period longer than the time-limit prescribed in these rules to deliver the out-of-clearing settlement document, for the purposes of these rules the said portion shall be considered non-cash.

Article 38: With respect to the conditional bulk transaction, the buyer’s broker shall, until the end of working hours of the business day at the latest after the transaction, have to submit the names of buyers along with the number and percentage attributable to them as well as the purchase order received to the Farabourse. The shares are allocated on the basis of the names so stated.

Article 39: From the time of executing transaction until when it has become finalized, shares shall remain blocked in the seller’s trading code.

Article 40: If the out-of-clearing settlement document is not delivered by the seller’s broker or the cash portion of the deal is not settled by the buyer’s broker within the specified period, the transaction shall not receive the final approval by the Exchange.

Article 41: If the out-of-clearing settlement document is not delivered by the seller’s broker within the specified period, the matter shall be referred to the authority in charge of investigating the brokers’ violations. If the seller’s broker is found to be violator on the basis of an absolute ruling, he/it shall have to pay one percent of the transaction value at the base price to the buyer’s broker as well as the fees based on the transaction value, to the SEO, Farabourse and Central Depository Company. The buyer’s broker shall, upon reduction of his/its fees, have to pay the remainder as compensation to the buyer.

Article 42: If the buyer’s broker does not deposit the cash portion or fails to fulfill the buyer’s obligations as to the out-of-clearing settlement document within the specified period, the matter shall be referred to the authority in charge of investigating the brokers’ violations. If the buyer’s broker is found to be violator on the basis of an absolute ruling, the fees and charges of the buyer’s broker, the SEO, Farabourse and the Central Depository Company shall be deducted out of the deposit under article 36 and the remainder shall be credited to the account of the seller’s broker. The seller’s broker shall, upon deduction of his/its fee, have to pay the remainder of the said deposit as compensation to the seller.

Article 43: With respect to the bulk transactions, the provisions not prescribed in articles 21 to 42 articles shall be subject to other procedures and rules of transactions as stipulated in the existing regulations. 

Chapter Ten: Block Transactions

Article 44: The block transactions shall be executed under the trading symbol of a market separate from the trading symbol of an ordinary market on the trading system.

Article 45: The block transactions shall be carried through discontinuous auctions and once every five minutes.

Article 46: The daily reference price for block transactions market shall be equivalent to the reference price of the same day in an ordinary market.

Article 47: Other requirements for block transactions shall correspond with the conditions for the deals in the main symbol.

Chapter Eleven: General Requirements Governing the Initial Offering

Article 48: The initial offering shall be subject to the listing and entering of securities pursuant to the Listing Rules and full information disclosure as per the Regulations on the Issuers’ Disclosures and other prevalent rules to the Farabourse.

Article 49: The Listing Council shall prescribe the procedures of securities initial offering as proposed by the Farabourse.

Article 50: The initial offering on the Farabourse as per the procedures for entering orders shall take place pursuant to the rules which shall be approved by the SEO’s board of directors as proposed by the Farabourse board of directors. 

Article 51: If, at the discretion of the Listing Council, the size of company’s free floating shares is found to be sufficient, the initial offering shall take place as follows:

The matter shall have to be made public by the Farabourse, at least three business days prior to the offering.

The trading symbol shall be opened in the ordinary market and on the opening day the price limit shall not apply. The closing share price shall be the weighted average of the daily share transactions on the opening day. 

Note: The Farabourse managing director shall be entitled to make the share pricing subject to the transactions with a specific volume of the company shares and, where the transaction is not executed with the specified volume, shall cancel the transaction and make it subject to offering in the following trading sessions. This matter shall be specified in the notice published as regards the initial offering. 

In the initial offering as per the foregoing procedures, the company shares shall have to be registered with the Central Depository Company and a certain portion thereto shall, at the discretion of the Farabourse managing director, be qualified for transaction.

Chapter Twelve: Initial Offering by Auction 

Article 52: Prior to the initial offering by auction, the Farabourse board of directors shall decide on the following issues: 

The minimum number of shares to be offered on the initial offering day

The minimum number of shares that the offerer shall have to gradually offer after the initial offering and the intended time-limit.

The restrictions on the purchase for each trading post and/or under each ownership code.

Note 1: The quota of each trading post shall be designated in a manner that the minimum 60% or the maximum 95% of the active posts of the Farabourse member brokers can be allowed to buy shares.

  

Note 2: The approvals of Farabourse board of directors as regards the issues under this article shall have to be announced by the Farabourse at least 2 business days prior to the offering.

Article 53: The brokers shall receive the purchase requests from the applicants upon announcement of public offering of shares by the Farabourse. All the applications received for initial offering shall be handled at the limit price.

Article 54: The seller’s broker shall, at least after 10 minutes as of the time of symbol opening, have to take action to offer shares. In any case, he shall have to offer shares in a manner that the offering is achieved until the end of the official trading session.

Article 55: In case that lower than 50% of the shares notified for offer are sold on the initial offering day, the Farabourse shall have to cancel all the transactions carried out on the first day and adjourn the initial offering for another day.

Article 56: The buyer’s brokers shall not buy shares in excess of their authorized quota. If the brokers buy shares more than their authorized quota during the initial offering, the Farabourse managing director shall be permitted to cancel the purchases exceeding the quota or total brokers’ purchases at the initial offering. Any type of the broker’s violation in the course of the initial offering process shall be referred by the Farabourse to the authority investigating the brokers’ violations so as to look into such violations as per the rules.

Article 57: The brokers shall be permitted to use the collective buying code for purchase and thereafter they may take action to allocate shares in light of the price for purchase application, priority of time for purchase application and the geographical region in which the purchase application has been received from the applicant and, as far as possible, allocate certain shares to all of the applicants, whether natural persons or legal entities, who have submitted their written applications for purchase. In any case, the responsibility of fair allocation of shares among customers of each broker during the initial offering shall be borne by the broker. 

Article 58: The shares which are not sold during the initial offering day and/or the deals thereto are cancelled shall have to be offered in the following days at the discretion of the Farabourse managing director.

Article 59: During the initial offering day, merely the shareholders who are regarded as the offering underwriters shall be permitted to offer their shares.

Article 60: Upon the sale of the aggregate shares designated for the initial offering on the first day, the restrictions on the price fluctuation for shares shall be taken into account.

Chapter Thirteen: Transactions on Rights Issue to Purchase Shares

Article 61: The holder of the rights issue certificate who is willing to sell his stocks may contact brokerage firms during the subscription period to complete the sales application form and deliver his rights issue certificate to the brokerage.

Article 62: For the buyer of the rights issue on the Farabourse, the certificate of rights issue transfer shall be issued and the second-hand transactions shall be carried out pursuant to such certificate.

Article 63: The transfer certificate issued to the buyer of rights issue on the Farabourse, in case the buyer directly owns separate rights issue as well, shall indicate the buyer’s aggregate rights issue. In such a case, the broker shall, upon receipt of rights issue certificate issued by the company, deliver the transfer certificate to the buyer.   

Article 64: If the buyer of rights issue wishes to subscribe for new shares, he shall have to pay the subscription to accomplish the procedures thereon for conversion of the rights issue into shares and thus the respective broker and Farabourse shall bear no responsibility in this respect. 

Article 65: If the holders of rights issue certificate do not credit the subscription to the bank account mentioned in the prospectus within the specified period, their rights issue shall be deemed as the “unused rights issue”.

Article 66: The issuer shall, within 5 business days upon expiry the subscription deadline for holders of rights issue, have to notify the number and particulars of unused rights issue to the Central Depository Company while collecting information and the amounts deposited by the holders of rights issue. Under any circumstances, the issuer shall have the responsibility of reporting the particulars of the persons who have not used their rights issue and designation of their shares number.

Article 67: The Central Depository Company shall transfer all rights issue under article 66 to one trading code and shall also report the number and trading code of the unused rights issue to the issuer, SEO and Farabourse.

Article 68: The issuer shall have to the make the utmost effort to sell the unused rights issue at the best price.

Note: If, at the discretion of the managing director, the provisions of this article are not complied with, he shall be authorized to cancel all or a part of the aforesaid transactions.

Article 69: The broker who is purchasing the unused rights issue shall have to credit the subscription for the purchased rights issue to the company’s account.

Article 70: Other standards relating to the tradings in the rights issue certificate shall correspond with the rules governing the shares transactions.

Chapter Fourteen: General Standards Governing the Transactions on the Farabourse Third Market

Article 71: In the Farabourse third market, three types of offerings are handled as follows:

Package offering of securities

Retail offering of securities

Securities subscription

Article 72: The completed offering application forms shall be considered by the Farabourse Offering Committee. The Offering Committee shall notify the applicant broker its agreement or disagreement to the offer within the period of 7 business days at the latest after delivery of the completed application forms to the Farabourse. 

Article 73: The responsibility of checking the completeness of documents and compliance with the standards and regulations on behalf of the offeror shall be borne by the offering broker.

Article 74: The composition of Offering Committee members, standards and procedures for holding meetings, the documentation to be presented by the offeror and the method of decision making by the Offering Committee shall be approved by the Farabourse board of directors. 

Article 75: If the Offering Committee agrees, the Farabourse shall take action to enter names of securities in the offering list and publish the offering advice simultaneously.

Chapter Fifteen: Package Offering in the Third Market

Article 76: The price limits and volume limit in respect of the package offering shall not apply.

Article 77: The package offering of securities shall be handled as package deal from the same trading code and/or in conformity with the rules approved by the SEO’s board of directors.

Article 78: The conditions stated by the seller’s broker after publishing the offering advice by Farabourse shall not be altered. If the conditions of offering advice are changed or the seller withdraws from selling the securities, the bulk transaction shall not be executed and the conduct of transaction shall be subject to the seller’s second application. Under the circumstances, the matter shall be referred to the authority investigating the brokers’ violations and, upon the Farabourse notice, the securities shall remain non-tradable until when an absolute and final verdict has been issued.

Article 79: If the seller wishes to publish a sales notice in newspapers, the information therein shall not be inconsistent with the information supplied to the Farabourse. In case of any inconsistency, the information published on the Farabourse official website shall prevail.

Article 80: The minimum change in the authorized price of each order in the package offering shall be one rial.

Note: The Farabourse managing director shall, on the basis of market condition, be entitled to make the minimum change in the authorized price of each order for the next trading session. However, the matter shall be made public prior to the start of the next trading session.

Article 81: The number of securities in each purchase order shall be equal to the number of securities stated in the offering advice. Accordingly, the price fixed in the purchase orders shall not be lower than the base price.

Article 82: It shall not be authorized to reduce the purchase order price entered in the trading system or enter the order at a price lower than the highest purchase order entered in the trading system and it shall be authorized to delete the purchase order only if such order has been entered in the trading system at a higher price.

Article 83: The seller’s broker shall have to make an offer prior to the 5 closing minutes of the trading session if the purchase order is entered in the trading system at a base price or higher than that. The offer by the seller’s broker shall be only possible when at least 3 minutes has passed as of the time of entering the best purchase price in the trading system. 

Note 1: If the purchase order is entered during the 5 closing minutes of market hours, the continuation of competition shall be postponed to the next trading session and the broker with the best purchase order shall have to enter his order in the trading system at the same price in the beginning of the next trading session.

Note 2: Non-compliance with the provisions of this article by the buyer’s broker or seller’s broker is deemed to be violation and the Farabourse shall have to refer the matter to the authority in charge of investigating the brokers’ violations. 

Article 84: If the violations committed by the buyer’s broker or seller’s broker prevent the conduct of transaction, the violator shall have to pay the counterparty one percent (1%) of the transaction value at the base price as compensation. In this respect, the broker may receive the required collaterals or guarantees from the buyer or the seller. Accordingly, in case the transaction is not executed under this article, the violator shall have to pay the handling charges incurred as per the transaction value at the base price to the SEO, Farabourse and the Central Depository Company.   

Article 85: In the transactions of package offering, the offeror shall be entitled to stipulate conditions for settling the deal in cash or by installment and state them in the offering advice. In this case, the said transaction is considered the conditional package offering and shall be subject to the prevailing rules.

Article 86: In conditional package offering, the buyer’s broker shall be authorized to enter order in the trading system when he/it unconditionally receives an equivalent of three (3%) percent of the securities transaction value at the base price from the customer in cash or in the form of banking letters of guarantee and shall, as the case may be, credit it to the account of the Central Depository Company and deliver it to this company and then submit the certification of the said company supporting the receipt of the related guarantees to the Farabourse.    

Note 1: If the buyer’s broker fails to meet the settlement obligations, the deposit referred to in this article shall be refunded to the seller’s broker upon deduction of handling charges and the costs incurred for the transaction.

Note 2: Where the buyer’s broker reports his/its withdrawal from continuation of competition in writing after submission of purchase application and before conduct of transactions or where the buyer’s broker fails to carry out the deal, his deposit shall, within two business days after the withdrawal date or conduct of transaction, be refunded upon confirmation of the Farabourse managing director indicating that the broker’s actions during the course of transaction are not inconsistent with the prevailing rules.

Article 87: The buyer’s broker shall, within 9 business days at the latest after the conduct of transaction, have to settle the cash portion of the deal through the clearing house of the Central Depository Company and shall, within 8 business days at the latest after the conduct of transaction, have to submit the required documents to the seller to issue the out-of-clearing settlement document for the non-cash portion of the deal. The seller’s broker shall have to submit the out-of-clearing settlement document to the Farabourse and the Central Depository Company upon receipt of the required documents for issuing the-out-of-clearing settlement document within 9 business days at the latest after the conduct of transaction. If the cash portion is paid and the out-of-clearing settlement document is submitted to the Central Depository Company within 9 business days at the latest after the conduct of transaction, the transaction entry in the trading system shall be accomplished until the end of the next business day at the latest. 

Note 1: Where the seller’s broker or the seller refuses to receive the documents stated in this article, the buyer or his broker shall be entitled to submit the given documents to the Central Depository Company to be entered in the records against a receipt. 

Note 2: If shares are offered with the aim of executing a bulk transaction by the Privatization Organization, it shall be possible to extend the deadline for settling the cash portion and present the out-of-clearing settlement document within 30 business days upon the notice given by of the Privatization Organization.

Note 3: In case the seller’s broker designates a period longer than the deadline prescribed under these rules to present the out-of-clearing settlement document for paying the cash portion of the deal, such portion shall be deemed non-cash pursuant to these regulations.

Article 88: With respect to the conditional package offering, the buyer’s broker shall, until the end of working hours of the business day after the transaction, have to present the names of buyers along with the number and the percentage attributable to them as well as the purchase order received to the Farabourse. The allotment of securities shall take place on the basis of the names mentioned by the buyer’s broker.

Article 89: From the time of transaction conduct to the time of its finalization, the securities shall remain blocked in the seller’s trading code.

Article 90: Where the seller’s broker does not submit the out-of-clearing settlement document or the buyer’s broker does not settle the cash portion of the deal within the specified time-limit, the transaction shall not be considered firm and final by the Farabourse. 

Article 91: In case the out-of-clearing settlement document is not delivered by the seller’s broker within the specified time-limit, the matter shall be referred to the authority in charge of investigating the brokers’ violations. If the seller’s broker is found to be violator on the basis of an absolute ruling, he/it shall have to pay one percent of the transaction value at the base price to the buyer’s broker and the fees incurred, as per the transaction value, to the SEO, Farabourse and the Central Depository Company. The buyer’s broker shall, upon reduction of his/its fee, have to pay the remainder as compensation to the buyer.

Article 92: If the buyer’s broker does not deposit the cash portion or fails to fulfill the buyer’s obligations as to the out-of-clearing settlement document within the specified time-limit, the matter shall be referred to the authority in charge of investigating the brokers’ violations. If the buyer’s broker is found to be violator on the basis of an absolute ruling, the handling charges of the buyer’s broker, the SEO, Farabourse and the Central Depository Company shall be deducted out of the deposit under article 86 and the remainder shall be credited to the account of the seller’s broker. The seller’s broker shall, upon deduction of his/its fee, have to pay the remainder of the said deposit as compensation to the seller.

Article 93: The provisions not prescribed in the standards governing the package offering shall be subject to other procedures and rules of transactions as specified in the existing regulations.

Chapter Sixteen: Retail Offering in the Third Market

Article 94: In retail offering, the buying applicant is a person/an entity that wishes to purchase a certain volume of specific securities from the holders of such securities.

Article 95: If the securities are offered following the applicant’s request, the Offering Committee shall fix a period for his purchase and such period along with other conditions set down by the buying applicant shall be announced in the offering advice.

Article 96: If the holders of securities wish to sell their securities to the buying applicant, they shall have to deposit their securities with the Central Depository Company through their own brokers and then enter their sales order in the trading system via their brokers.

Article 97: At the expiry of the time-limit specified for purchase, the buyer’s brokers shall enter the order with the stated volume and the transactions shall be effected by holding a single price auction.

Article 98: The settlement of transactions in the retail offering market shall be subject to the regulations pertaining to the settlement of ordinary transactions.

Chapter Seventeen: Subscription in the Third Market

Article 99: The securities subscription including the shares of public joint-stock companies, participation certificates and certificates of deposit shall take place pursuant to the license issued by the SEO and as per the registration statement.

Article 100: The offering broker shall, at least 7 business days prior to his/its own suggested offering time, have to submit the following documents and information to the Farabourse:

confirmation of the Central Depository Company indicating the deposit of total securities for subscription

registration statement

prospectus

the method of clearing and securities settlement

the conditions laid down for the buyer’s brokers as regards their facilities or the period of distributing securities in the broker’s local network

the documents and information which the buying brokers are required to receive from buyers and deliver them to the issuer including the identification data of buyers and their bank accounts.

Article 101: In case the documents and information provided are found to be sufficient, the Farabourse shall, at least 3 business days prior to the start of subscription, publish the prospectus and registration statement.

Article 102: On the first day of subscription, the securities symbol shall be opened by Farabourse in a manner that the orders at fixed price in the offering advice can be allowed to enter the system. During the course of subscription the base point of orders and volume limit are determined in a way to be consistent with the conditions laid down in the offering advice as practically as possible. The arrangements in the trading system including the price limit, the base point of orders and volume limit as per the conditions set out in the prospectus shall be established and announced by the Offering Committee. 

Article 103: The brokers shall, after the opening of the symbol, have the opportunity to enter the purchase order in the trading system during the period specified in the prospectus. The purchase orders shall conform with the conditions laid down in the offering advice. The OTC shall be permitted to delete the orders which do not conform with the foregoing conditions.   

Article 104: During the course of subscription, if, at the end of each day, the volume of purchase orders is equivalent to or in excess of the aggregate securities for subscription, the securities offering shall be handled on the prorata basis.

  

Article 105: If, at the end of subscription period, the number of bids entered in the trading system is lower than the aggregate securities for subscription, the underwriter shall have to enter the order for the amount of difference between the orders entered and the total securities subscribed. The offering shall take place after the entry of underwriter’s orders in the trading system.

Article 106: If, according to the registration statement, it is prescribed that a portion of the securities offering take place through the banking network or a network of other brokerage firms, the securities may be sold through such networks during the course of subscription period. At the end of each day of the subscription period, on he basis of the funds credited to the related banking account and as per the broker’s advice, the Farabourse shall transfer the subscribed securities to the intermediary code. The broker shall, not later than 10 days at the expiry of subscription period, have to submit the list of securities buyers to the Farabourse so as to allot the purchased securities to the customers’ codes. If all or parts of the trading codes are not introduced, the remaining securities shall be transferred to the broker’s code.

Chapter Eighteen: The Requirements for Secondary Transactions in the Participation Certificates Market

Article 107: Where there is material information affecting the price of listed securities in the participation certificates market, the Farabourse shall be authorized to halt the relevant trading symbol as per the rules and thereafter take action to disseminate information as regards the opening of symbol. The price limit shall not apply on the opening day of the symbol.

Article 108: The buyer shall, in addition to the purchase price of participation certificates and trading expenses, have to pay the retained profit earned from such certificates (the profit earned between two maturity periods recorded in the prospectus) as well. 

Article 109: The guarantor, or market maker shall, in line with his/its obligations to purchase securities, have to take action as regards the entry of necessary purchase orders and their retention during the transaction period as per the procedures specified in the registration statement. Where the total orders received through the guarantor or the market maker are executed, he shall have to enter new orders not later than 5 minutes thereafter.

Article 110: If a person holds over 5% of the total issued securities, he may voluntarily offer his securities for a bulk deal in accordance with the standards and conditions prescribed for bulk transactions.

Article 111: Other provisions relating to the method of receiving purchase orders, securities sale and other prevalent rules including the verification of customer’s identity, receipt of trading code and the like shall correspond with the standards which are governing the securities trading under these rules.

Article 112: Only the securities which have been deposited with the Central Depository Company and for which the transfer certificate has been issued shall be eligible for transactions on the Farabourse.

Chapter Nineteen: Requirements Governing the Operations of Brokers and Market-Makers

Article 113: The conduct of transactions on the Farabourse by brokers shall be subject to their membership in this entity (Farabourse). The brokers’ membership in Farabourse is achieved in accordance with the rules which shall be approved by the SEO’s board of directors as proposed by the Farabourse board of directors. 

Article 114: The broker shall have to use the format prescribed by Farabourse for the purpose of receiving the customers’ orders in the electronic or non-electronic forms.

Article 115: The broker shall have the responsibility of verifying the customer’s identity and shall have to achieve this as per the rules in force. 

Article 116: The brokers shall have to receive the customers’ orders and execute them pursuant to the rules. Non-receipt of customers’ applications as well as entering and/or executing it contrary to the prevalent rules shall be deemed a violation and the matter shall be referred to the authority in charge of investigating the brokers’ violations.

Article 117: Only the brokers who use the orders book confirmed by the SEO shall be entitled to use the collective trading code and enter group orders. It is mandatory to comply with the standards regarding the entry and execution of customers’ orders in the said book as prescribed by the SEO.

Article 118: The market making activities on the Farabourse shall be achieved by using the two methods of auction-based market making and negotiation-based market-making. The negotiation-based market-making shall be possible merely in the secondary market and the participation certificates market and the regulations thereof shall be approved by the Farabourse board of directors.

Article 119: The auction-based market-making activity on the Farabourse shall be conducted pursuant to the regulations on market-making operations as approved by the SEO’s board of directors.

Article 120: The market-making activities on the Farabourse shall be possible as per the executive regulations on market-making approved on Dec. 24, 2006 by the board of directors of the Organization of Tehran Stock Exchange Brokers whereby all the functions and powers of this Organization prescribed in the said regulations shall be delegated to the Farabourse for enforcement. Accordingly, for the purposes of these regulations the term “listed company” is changed to “the issuer whose securities have been listed on the Farabourse ” and the term of “exchange broker” is changed to “the broker listed on the Farabourse”. The market-making application and the obligations undertaken by the market-maker shall be notified to the Farabourse by brokers in a format approved by the Farabourse board of directors.   

Chapter Twenty: Other Provisions

Article 121: The rates set for the Farabourse services and handling charges and the manner of receiving them within the limits allowed by the SEO’s board of directors shall be approved by the Farabourse board of directors. 

Article 122: With respect to the listing of the shares of the companies where the statutory or constitutional restrictions exist regarding their shares ownership, the Farabourse shall have to exert control over such restrictions as per the rules and within the context of their operational possibilities. 

Article 123: All the provisions which are required to be notified by the Farabourse under these rules and all items of information which are to be disseminated as per these rules shall be published on the Farabourse official website.