Central Securities Depository of Iran regulates brokers' purchasing power through implementing a "Credit Limit" policy.
Following the introduction of this credit limit policy, brokers are advised to make timely bill payments to ensure that the outstanding amount does not exceed the credit limit to continue receiving uninterrupted service.
The policy ensures that the amount of this credit is consistent with the financial capacities of each broker.
Offering credit to brokers:
• Encourages them to make higher value and quicker payments
• Reduces risks, limits the amount of potential bad debt
• Enables CSDI to implement a credit hold function for late payment or reaching credit limit
• Can be used as leverage
There are two main factors CSDI considers while setting brokerage firms' credit limit: Their credit score and income level.
* Credit Score:
• On-time payment history
• Age of credit history
• Number of derogatory marks
• Debt-to-income ratio
* Brokers' Income
Advance payments and establishment of additional guarantees such as bank guarantees, credit insurance etc. would maximize the sales while controlling the risk of bad debts and improving your working capital.
In fact, Securities and Exchange Brokerages Association of Iran, affiliated with SEO, will re-evaluate the scores from time to time. If brokers have used their credit responsibly or improved their status, they may decide to report to CSDI to reconsider and increase their limit upon the request of the broker.
On the flip side, if they have made some late payments or missed due times, CSDI may find that reason enough to decrease their credit limit.