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Capital Markets

Turkey: Going forward costs brokers and exchanges dear

TurkDex introduces exchange-traded options; ISE head steps down

Turkey continues to open up to derivatives and structured products while much of Europe clamps down on them. Last year saw the introduction of warrants and ETFs traded on the Istanbul Stock Exchange (ISE). This year will see the introduction of exchange-traded options contracts on TurkDex, the derivatives exchange based in Izmir.

Ilhami Koc, CEO of Is Investment Bank, has stated that the next stage in Turkey’s financial development will be the deepening of the country’s derivatives markets.

Turf war

Yet behind the scenes a turf war is raging as to who will get the spoils. On one side is the ISE, the largest exchange in the country. On the other is TurkDex, of which the ISE is a large shareholder, with 18%.

However, the largest shareholder in TurkDex is the Union of Chambers and Commodity Exchanges of Turkey, with 25%, which represents the interests of Turkey’s 100-plus municipal commodities exchanges. The Izmir Commodity Exchange owns 17% of TurkDex.


New chairman of the Istanbul Stock Exchange Ibrahim Turhan (l) and outgoing chairman Huseyin Erkan at a handover ceremony at the bourse in Istanbul January 2

Adding a third dimension to proceedings is the government. It plans to merge all of Turkey’s exchanges into one and then privatize that entity. It also aims to move the new body to a financial centre it is creating on the Asian side of Istanbul. Understandably, the smaller exchanges are not happy about this and are said to be vigorously lobbying the government against the move. Moreover, the members of the ISE are also not pleased with the plan: they think they own the ISE, not the government. Huseyin Erkan, CEO of the ISE, acknowledged there were differences of opinion as to who owns the exchange. The government owns the buildings and hard assets, but the members think they own the underlying business, which is where the action will be.

Nevertheless, at the end of November, the government passed a new law expanding the board of the ISE and giving it the power to appoint a new chairman and CEO. Erkan announced he would be retiring from his post a year early as a result of that law.

Bringing the newly enlarged exchange under direct government control fits the pattern established earlier in the year when the government brought all the financial regulatory bodies under its direct supervision. However, until the final decision is made as to who owns what, and who gets what percentage of the new exchange, expect Turkey’s brokers and exchanges to fight their corners.

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