Iraq stock exchange

Iraq Stock Exchange (ISX) had established and started operations in June 2004. The ISX operates under the oversight of the Iraq Securities Commission (ISC).

The exchange is a self-regulated organization, owned by the members. The ISX is financially and administratively independent from the Iraqi government including the Ministry of Finance. It is organized as a non-profit entity that is owned by its members, namely licensed brokers. It is regulated by the Iraq Securities Commission and follows the operational procedures outlined in its By-laws that are fully compliant with the Iraqi Securities Law.

A Permanent Securities Law to succeed Law 74 and designed to provide a comprehensive legal and regulatory framework for securities trading and oversight will be introduced in the future.

The ISX succeeded Baghdad Stock Exchange which operated under the Iraqi Ministry of Finance. The Baghdad Stock Exchange was initially established in 1992 as the official securities exchange. Following the inauguration of the ISX, the Baghdad Stock Exchange ceased to exist.

At present, the ISX is the country’s only exchange. The market started trading with 15 listed companies. Currently the number of stocks listed in the market are 91.

Iraq Securities Commission ISC

The Securities Commission is an independent body that acts as a regulator of trading, members and listed companies. The commission’s roles include supervising market activities, setting trading rules in addition to regulating and monitoring trading mechanisms. ISC is the body responsible for listing companies, ensuring transparency and compliance with market regulations and disclosure requirements.

Brokerage firms

Currently there are a total of 45 registered brokers who are active on the ISX. Brokers are licensed and regulated by the ISC. Most banks are active in trading the market through their brokerage subsidiaries.

Trading time

Iraq Stock Exchange (ISX) operates 5 trading sessions on Sunday, to Thursday every week. During those days the market is open from 9:30 a.m. local time to 12:00 p.m. The first half hour is a pre opening session when orders are entered and amended. The session is followed by a continuous trading session which ends at 12:00 p.m. local time. Trades are settled T+1.

At the end of the pre opening session, opening prices are estimated. The opening price is recalculated every time a new order is entered in the pre-opening session.

The final opening price is fixed at the end of the pre opening session. The trading unit and price change unit are determined in the pre opening session and become valid throughout the continuous trading session. Trading unit is commonly one share and price change unit is 0.10 fils.

Trading Manuals

Before executing orders, brokers must verify the identity of the client, availability of funds in buy orders and availability of shares in sell orders. Trade instructions could be received by phone, email or fax but must eventually be received in a written format. Brokers are not authorized to deal on investors’ behalf without a written consent and are not allowed to fund their clients. Written authorization has to state the name of the client, number of shares and instructed price.

Brokers bear the responsibility of verifying the validity of client’s signature and identity. Orders cannot be passed on to more than one broker regarding the same shares. Similarly, brokers cannot execute orders given to other brokers on the same shares.

 Once all the above is satisfied, each broker enters the buy/sell order manually on the board under his designated space stating price and quantity. Matched orders are crossed from the board and executed. Orders are entered according to the time and date in which they were received. Priorities are given to the lowest price in sale transactions and to the highest price in buy transactions.

Manual Trading

Trade commences after the pre opening session in a written auction using Wight boards and markers,

Orders get executed in the specified units either partially or in full,

Priorities are given to highest price in the buy orders and the lowest prices in the sell orders,

Orders are crossed from the board once matched.

Electronic Trading

Electronic trading was introduced to the market in April 2009, using a system designed by NASDAQ OMX and based on the NASDAQ OMX technology. Only 20 listed companies are enabled to trade electronically and the rest of the market continues to rely on manual trading through conducting auctions using Wight boards and markers. In the first day of electronic trading, three banks and two hotels had their shares bought and sold under the new system. The other 86 companies listed on the ISX will gradually switch to electronic trading.

Settlement

T + 0 for Cash Transactions

T + 1 for Share Transactions

Fees and Commission

Brokers’ commission is 0.006 of the full value of the transactions. Of which, 0.012 goes to the exchange.

Foreign participation

Foreign investors are allowed to invest in ISX and there are no foreign ownership restrictions. As a first step investors have to verify their identity by a licensed Iraqi broker. Required documents have to be notarized locally and certified by the Iraqi Embassy in the investors’ country or any approved government authority. The required documents are as follows:

- Copy of a personal Identification document, Copy of a valid passport.

- Incorporation contract and registration license certified by the issuer and the Iraqi Embassy or the relevant Iraqi authority for legal entities,

- Permanent and temporary address, e-mail address, and phone number,

- For Corporate entities, a copy of the entity official papers verified by the issuing establishment and the Iraqi Embassy.

Statistics

The Iraq stock exchange total market capitalization US$3 B.

The number of listed companies has been gradually rising and currently there are 91 listed companies on the ISX. The market is dominated by banks which represent 73.0% of market capitalization and 22.0% of total number of listed companies.

Daily turnover is around US$2.0 m, which is equivalent to 0.07% of the market size. Market activity is dominated by local investors and Iraqis living abroad. Foreign participation is minimal and does not exceed 10.0% on average.

Trading in Iraq Stock Exchange 2004-October 2009

CEO of Iraq Stock Exchange - Taha Ahmed AL-Salam

Iraq Economic Growth Report