Q&A with Shredd regarding ISX (expanded) Wed Jan 23, 2013
Member Q: Wouldn't the dinar need a better rate before the ISX went live and started trading? Let me see if I can explain this right.....
If the ISX is supposed to go live on Feb. 3..... With a low rate on the dinar.....in certain instances, could a company come in and buy, say 10 million dinars worth of shares, then the RV happens and BAM, they have say 200 million DOLLARS (depending on the actual rate of course) worth of shares?
Extreme case, could someone like Donald Trump come in and say "hey, that is cheap and it's gonna be worth allot more soon".....spend his "pocket change" and 2 days later basically own everything in Iraq after the RV happens?
Shredd A: Great questions! I'll answer in two portions.
First of all, the isx doesn't go live next month, asiacell shares on the ISX do. I believe this will be a monumental shift for Iraq in the market and even today, we see articles talking about this!
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This is like having an existing sports team that has never done well and then all of the sudden, a superstar athlete joins and puts them on the map!! The isx has been open since I think June of 2004.
Secondly, when the rate changes, all sides of the rate change...one up, one down. For example, if you have a million dollar loan in dinar and make monthly payments of 10,000, after the rv you would have a 100,000 loan with 1,000 dinar payments.
So in your example, let's say you bought 100 shares at 22 dinar per share. You paid 2,200 dinar or $1.89. So after an rv of say a buck, you could sell those 100 shares at .022 dinar per share, or $2.20.
At my bank, we have foreign-denominated securities and even invoices that have to convert and it can be more expensive or more economic from one day to the next based on the rate of exchange, but these are normal daily fluctuations.
The sale price going down to .022 dinar per share avoids a complete sell-off of all debt on the isx. Let me explain....
Remember, stocks are shares of ownership in a business. What you suggest would kill the market and bankrupt all of the issuers because they would have to pay the sellar (which wouldn't happen--the issuer would declare an event of default and you wouldn't get any money anyways).
The rate change is on the currency only, not denominations of debt. The CBI and its reserves will "pay" for the jump in value and paying for the exchange....not the companies issuing the stock.
The ongoing growth in the exchange, especially as of late...and the continued growth is amazing because it is a platform for trading....a "match.com" of buyers and sellars Razz . This in turn facilitates investing which greases the wheels of any economy.
This is that "bigger picture" we have been working so hard to show our members!