1. Opportunities for the Tehran Stock Exchange Discussion Material STRICTLY PRIVATE AND CONFIDENTIAL Georges Ugeux 2 0 1 6

2. Figures going into 2015 Market Capitalisation of Global Exchanges STRICTLY PRIVATE AND CONFIDENTIAL  January 2015 Figures:  Global Market Capitalisation: USD 69.978 trillion  Total Americas Capitalisation: USD 29.779 trillion  Total Asia-Pacific Capitalisation: USD 21.744 trillion  Total EMEA Capitalisation: USD 18.455 trillion  Tehran Stock Exchange: Approx. USD 108 billion  The TSE is well placed among its Western Asian peers – eclipsed in market capitalization only by Borsa Istanbul, the Tel Aviv Stock Exchange, and Saudi Arabia’s Tadawul; it is well matched by the Abu Dhabi Securities Market. Approximate Share of Global Market Capitalisation

3. Tehran Stock Exchange (January 2015) Market Capitalisation Weight – by Industry Segment STRICTLY PRIVATE AND CONFIDENTIAL New York Stock Exchange (March 2013)

4. Monthly Trade Volume (January 2015) Global Trading Volume STRICTLY PRIVATE AND CONFIDENTIAL  January 2015 Figures:  Global Market Volume: USD 8.231 trillion  Total Americas Volume: USD 4.130 trillion  Total Asia-Pacific Volume: USD 3.044 trillion  Total EMEA Volume: USD 1.220 trillion  Tehran Stock Exchange: Approx. USD 747 million  The TSE’s trading volume is less than that of its Western Asian peers: the Tel-Aviv Stock exchange has a monthly volume of about USD 4.209 billion, the Tadawul about USD 43.126 billion, and the Bolsa Istanbul about USD 40.599 billion. Figures going into 2015

5. Index Performance STRICTLY PRIVATE AND CONFIDENTIAL 5-year Performance

6. Index Performance (with TEDPIX) STRICTLY PRIVATE AND CONFIDENTIAL 5-year Performance

7. The key challenges of regulated stock exchanges What we learned in US and European securities markets STRICTLY PRIVATE AND CONFIDENTIAL Georges Ugeux. Tehran 2 0 1 6

8. The Governance of the Exchanges Governance STRICTLY PRIVATE AND CONFIDENTIAL  Membership organizations  Collusion between the Exchange and its members to the detriment of investors  Institutional investors questioning the use of their orders to the benefits of the brokers  Lack of transparency of the market structure  Listed Exchanges  Lack of ownership of the financial community  IPO is a One-off bonanza that makes members rich and less committed to the future of the Exchange  Conflicted interests from other platforms Corporate Governance  Corporate Governance is key to the trust of investors  Key elements  Transparency and timeliness of information  Disclosure of significant events or evolutions  Board composition and treatment of conflicts of interests of Board Members, especially representing the public sector  Capacity to defend effectively shareholders interests  Rules on conflicts of interest  Insider trading  Financial expertise  Board Committees

9. Member Firms regulation Regulation STRICTLY PRIVATE AND CONFIDENTIAL  Self Regulatory structure  Independence of the internal regulation from the members  Supervision of Members  Implementation of the Exchange Rules  Internal Audit  Regulatory authorities  Inevitably influenced by the political world.  Statutory rights of the regulator  Risks of micro-managing  Support of the promotion of markets: good regulation is a competitive tool Exchange Rules  Rule making  How rules are conceived internally  Consultation of constituencies to ensure buying-in of the proposed rules  Approval by Regulators  Rule implementation  Requires an Independent regulatory group  Definition of sanctions  Audit by regulators  Ability to mobilize law enforcement

10. Exchange technology Technology STRICTLY PRIVATE AND CONFIDENTIAL  Trading technology  State of the art trading platforms are less expensive and more accessible  Speed needs to be controlled and enhanced  Robustness against hacking  Trading floor vs. electronic platforms  No need to take a defensive attitude  Compatibility between the two systems  Block trades and market price influence require trading skills Mastering IT competition  Level Playing field.  Exchanges need to be ahead of unregulated trading platforms  Interconnectedness with members if critical in IT reforms  Approval by Regulators  IT as a competitive tool for exchanges  Exchanges must be state of the art  How to turn IT into a loyalty program for members and investors

11. Liquidity Liquidity and Bonds STRICTLY PRIVATE AND CONFIDENTIAL  Liquidity providers  Primary liquidity: investors. Role of institutions vs individuals  Secondary liquidity: market making. The absence of market maker increases liquidity ruptures and price errance  Price discovery  Price discovery needs to be made on the Exchange: losing priced leadership would be a mistake  Circuit breakers of markets must be wide (at least 2X peak volatility: the Chinese experience in 2016  Circuit breakers on companies are important for large capitalizations. Smaller ones would never trade Bond market on exchanges Exchanges are not the optimal place for bond trading Over the counter experience Future role of the banks in bond financing under Basel III Bonds are mostly institutional Islamic bonds Islamic finance is a limited segment of the market, but a vibrant en effective one Could corporate bonds be structured both ways The two compartments can easily cohabitate Need for interest rate policies and arbitrage Interest rate derivatives Credit derivatives

12. Brand is based on reputation Enhancing the Brand STRICTLY PRIVATE AND CONFIDENTIAL  The leading brand must be trustworthy  Integrity matters  Governance is paramount  Transparency builds confidence  Stock Exchange brands are natural leaders if  They are the center of price discovery  They run the leading index  They listen to their members, but also to the listed companies  Their governance is dealing with possible conflicts of interest Enhancing the brand Cobranding Third Party Advocacy Leading events with key partners of the financial community Cobranding with listed companies Supporting members brands Enhancing the brand New products branded by the exchanges Public and Media relations Investor relations

13. Then opportunity of a generation to build the foundations of growth in Iran The Tehran Stock Exchange after the sanctions STRICTLY PRIVATE AND CONFIDENTIAL  The Tehran Stock Exchange has an appointment with Iranian History. It is at the dawn of its development.  Growth with equity is the key to corporate Iran and the growth of the country  Iran privatization is a TSE opportunity by promoting IPOs  Build an international strategy  International Finance Corporation  World Federation of Exchanges  TASE and regional Exchanges  Build liquidity while preparing opening to foreign investors  Risks of hot money could disturb greatly the markets. Need for a selective access by long term investors (excluding foreign hedge funds for example)  International dissemination of information  Roadshows with companies and investors outside of Iran  Close cooperation with Bank Markazi and Securities and Exchange Organization YES WE CAN MERCI