The idea of having a well-organized stock market to speed up the process of industrialization of the country dates back to 1930's when Bank Melli Iran started a study about the subject. A report completed in 1936 worked out the details for the formation of a stock market and laid down the preliminary foundation to proceed with the plan.

The outbreak of the World War II and subsequent economic and political events delayed the establishment of the stock exchange upto the year 1967 when the Stock Exchange Act was ratified. The Tehran Stock Exchange opened in April 1968. Initially only Government bonds and certain State-backed certificates were traded in the market. During 1970's the demand for capital boosted the demand for stocks. At the same time institutional changes like the transfer of shares of public companies and large private firms owned by families, to the employees and the private sector led to the expansion of the stock market activity.

The restructuring of the economy following the Islamic Revolution expanded public sector control over the economy and reduced the need for private capital. At the same time the abolishment of interest-bearing bonds terminated their presence in the stock market. As a result of these events, Tehran Stock Exchange started a period of standstill.

This stop came to end in 1989 with the revitalization of the private sectorthrough privatization of state-owned enterprises and promotion of privatesector economic activity based on the First Five-year Development Plan ofthe country. Since then the Stock Exchange has expanded continuously. By theend of the year 1996, a total of 220 companies with a market capitalizationof about $18 billions were listed in Tehran Stock Exchange. TSE index stoodat 2,150.54 points showing an annual average growth rate of 44.4 per cent.

TSE Council is the highest authority in the stock exchange. Stateofficials as well as the private sector representatives andspecialists are members of the Council. The Governor of the Central Bankpresides over the Council. Other constituent organs of TSE are AcceptanceCommittee, Arbitration Board and Brokers Organization.

The Board of Directors of the latter is the highest policy-making authority in TSE and appoints the general secretary as the chief executive officer, CEO, for aperiod of two years. Repeated appointment is permitted without any restriction. There are two Senior Deputies acting under the Secretary General who are responsible for economic and technical affairs and administration and finance respectively. Presently, TSE has 47 registered brokers and 122 employees.

Trading in TSE is based on orders sent by the brokers. Trading hours are 09:30-12:00 am Saturday to Wednesday, with the exception of public holidays. Settlement period is T+5 and TSE aims at reducing the period. A Central Depository System is operation in TSE and clearing process is automated. There are plans to expand the on-line trading facilities for provinces through VSAT system and to proceed with full automation of the exchange. TSE Services Company, TSESC, who is in charge of the site, supplies computer Services.

Trading fees include 0.5 per cent payable by both the sellers and the buyers. The two parties also pay development charge of 0.25 per cent. In addition, the sellers pay 0. 5 per cent tax at source. Presently, TSE trades mainly in securities offered by financial and non-financial companies. The introduction of project-based participation bonds that bear a fixed annual return during the period of the project and promise the final settlement of the profit at the date of its completion, has led to the possibility of diversification in the stock exchange. TSE is a member of FIBV, a founding member of Federation of Euro-Asian Stock Exchanges (FEAS). TSESC is a member of ANNA.