Beyond equity securities, the Iraq Stock Exchange can accommodate listings of debt instruments including corporate bonds and Sukuk (Shari’a-compliant securities). The framework administered by the Iraq Securities Commission (ISC) supports debt securities listings with elements adapted to the distinctive features of debt instruments compared with equity. For issuers and investors, debt securities listings provide capital markets access for fixed income products alongside the more established equity market.
Categories of Debt Securities
Debt securities that can be listed include, including conventional corporate bonds with fixed or floating interest payments, convertible bonds combining debt features with conversion rights into equity, sukuk and other Shari’a-compliant instruments structured to comply with Islamic finance principles, government and government-backed securities where applicable, specific structured products supporting particular commercial purposes, and asset-backed securities in evolving market segments. Each category has its own legal characteristics and market dynamics.
Listing Requirements
Debt securities listings face requirements adapted to the nature of the instruments:
- Issuer eligibility including credit standing supporting investor confidence.
- Minimum issue size supporting market liquidity.
- Prospectus or equivalent documentation providing information for investors.
- Where applicable, credit ratings supporting investor evaluation.
- Trust or agent arrangements supporting holder protection.
- Specific framework requirements addressing the instrument’s particular features.
- Where Shari’a-compliant, certification of compliance with Shari’a principles.
Requirements vary between equity and debt listings reflecting the different investor profiles and instrument characteristics.
Disclosure for Debt Securities
Disclosure for debt securities focuses on factors relevant to debt service capability, including issuer financial information supporting evaluation of debt service capacity, specific terms of the instruments including interest, principal, and maturity, security arrangements where applicable supporting holder positions, use of proceeds explaining how the funds will support debt service, specific risk factors affecting the issuer’s ability to perform, Where applicable, covenants and other protections for holders, and ongoing disclosure obligations during the life of the instruments. Equity-style disclosure emphasising growth prospects is less central; debt-style disclosure emphasises stability and payment capacity.
Sukuk-Specific Considerations
Sukuk listings engage Shari’a-compliance considerations alongside the general framework, including structure complying with Shari’a principles, shari’a scholar or board certification supporting compliance, underlying assets supporting the Sukuk structure, specific terms reflecting the Shari’a-compliant structure rather than conventional interest, ongoing compliance verification during the Sukuk’s life, specific framework provisions addressing Sukuk’s distinctive features, and Where applicable, treatment of inadvertent non-compliance through purification mechanisms. Sukuk structures combine substantive Shari’a compliance with capital markets infrastructure.
Trading and Settlement
Debt securities listed on the ISX trade through the exchange infrastructure with adaptations for the debt instrument characteristics. Trading conventions, settlement procedures, and price reporting follow the framework appropriate to the instrument type. Where applicable, specific market making arrangements support liquidity in debt instruments where natural trading volumes may be lower than for equities.
Investor Protection
Holders of listed debt securities have specific protections:
- Contractual rights under the instrument terms.
- Trust or agent arrangements supporting collective action.
- Continuing disclosure providing information supporting holder monitoring.
- Specific protections in default situations including enforcement mechanisms.
- Where applicable, security enforcement procedures for secured instruments.
- Voting rights on amendments to the instrument terms.
- Iraq Securities Commission oversight supporting issuer compliance with obligations.
Holder protections balance the issuer’s flexibility against the holders’ legitimate interests in performance.
How We Can Help
Etihad Law Firm advises issuers and investors on debt and Sukuk listings on the ISX, instrument design, issuance procedures, engagement with the Iraq Securities Commission and the Iraq Stock Exchange, documentation, ongoing administration during the listing’s life, and where applicable Shari’a compliance coordination. We work alongside financial advisers, Shari’a scholars, and accounting firms.