SETTLEMENT GUARANTEE FUND (SGF)
The SGF is assumed as a financial container to ensure fulfillment of the obligations of all parties involved in securities transactions by assuming counter-party risks.
The basic idea behind the establishment of the Settlement Guarantee Fund was to bring transparency in the trading and clearing system and provide protection to the investors in the market.
Acting as a credit risk management instrument, the Settlement Guarantee Fund has been designed to provide cash resources required for completing the settlement and manage brokers' risk of default.
This fund absorbs losses not covered by margin deposits of the defaulted member. Central Securities Depository of Iran as the one and only clearing house of the Iranian financial market ensures this by settling the default transactions by properly compensating the traders paying the amount of difference.
The main objectives of SGF are
•to guarantee settlement of transactions of the associates of all four exchanges in Iran capital market including Tehran Stock Exchange (TSE), Iran FaraBourse (IFB), Iran Mercantile Exchange (IME), and Iran Energy Exchange (IEE).
•thereby, to inculcate confidence in the minds of market participants
•to protect the interest of the investors.
•to increase the volume of transactions in the securities market (through the positive impact of SGF on the stability and discipline of market transactions.)
In case of the failure of any of the parties to meet its obligations, here the Settlement Guarantee Fund intervenes for the completion of the settlement in a timely manner and pay the value of the operation on behalf of the owner.
The system calculates current resources of the Fund as well as the contribution of members to it, records and publishes the defaults. The Settlement Guarantee Fund is interlinked with other systems like NetClear and is accessible through an internal URL.