protests’ effect on Turkish stocks is a reality
check for Borsa Istanbul as it seeks to sign a leading global
exchange as a strategic partner;
the Borsa’s top picks,
shown the most interest in Turkey;
strategic partner should be announced in
value derived from any partnership depends on Borsa
Istanbul’s successful privatisation and
integration of the country’s
Borsa has pursued looser alliances with exchanges and
brokerages with its neighbours and throughout
is speaking exclusively with Borsa Istanbul’s
CEO next month for more details.
protests have rocked Turkey’s fledgling bourse as
it finalises its search for a world-leading exchange to become
a strategic partner.
unrest acts as a warning, or reality check, for Borsa
to reconsider its bargaining power and position in securing a
strategic partner, local lawyers have said.
indexes have fallen sharply in the
wake of rioting across the country. It’s caused
local capital market players to reflect on what can and
can’t be achieved by BIST’s proposed
tie-up with a major exchange, which is set
decided by August.
would be naive to think that a strategic partner is a silver
bullet. And BIST is still a part of a developing market in the
end," said one source who has worked closely with the Capital
Markets Board of Turkey.
will be of value in showing that Turkey is part of the global
market and plays at that level," the source added.
were non-committal when asked if the backing of developed
exchange technology and infrastructure would have helped
BIST’s performance during the month of
they agree that June’s exchange volatility is a
stark reminder to BIST’ proposed suitors
as London Stock Exchange (LSE), Nasdaq and Deutsche
that Turkey’s capital markets have been the
weakest link in the country’s growth story, and
need significant improvement.
partnership would achieve
strategic partner is no panacea for a struggling capital
market, exactly what it will achieve is the subject of much
only details BIST has provided on the structure of, and rights
to be conferred under the alliance have been provided in
interviews. There has been no formal announcement.
speaking exclusively to its chairman Ibrahim
Turhan next month, to learn his plans.
meantime, lawyers working on
broader capital market reforms have
explained the key benefits they expect to flow from the
to Umut Kolcuoglu, partner at Kolcuoglu Demirkan, these include
know-how, international prestige and awareness, liquidity, and
could be achieved by seconding BIST executives to the partner
exchange. Financial technology would take the form of pricing
methodologies, new indexes, exchange techniques, and exchange
Avukatlik Bürosu’s Derin Altan understands
that aside from a partner that can help improve the
exchange’s technology and infrastructure, BIST is
also looking for liquidity providers and opinion
these functions could be provided by a single entity, it's also
possible BIST may set up a number of key strategic
Börse, Japan, then China
exchanges Turkish authorities have expressed interest
German exchange is tipped to be the most likely to strike an
agreement with BIST.
the foreign exchanges, Deutsche Börse has been the most
active in the country," said Kolcuoglu. This is based on the
Börse’s discussions, joint meetings and
marketing compared to LSE, Nasdaq and NYSE Euronext.
spokesperson from the German exchange said: "Deutsche
Börse has pointed out its understanding of a strategic
partnership for a successive build-up of an integrated exchange
organisation in Istanbul."
there are some obvious advantages for partnering with BIST.
"LSE is the main market for foreign issuers, and Germany wants
to become an alternative," said Kolcuoglu.
between the countries’ exchanges date back to 2011
and there are synergies
between the two countries. Germany’s Turkish
population, in the range of 3 million, is the largest in
Deutsche Börse spokesperson refused to comment on any
proposed tie-up between the exchanges. But he did said the
Börse gave BIST the idea to establish an integrated
exchange, brining trading, clearing, settlement, custody,
network and indices under one roof.
to other media reports, BIST’s CEO has said that a
memorandum of understanding
with the strategic partner will be signed by
this official tie-up should not overshadow BIST’s
pursuit of a string of other MoUs over the past year, to
internationalise its operations.
latest of these loose
to develop inter-exchange cooperation was
signed last month with Albania’s exchange, and
prior to that with the
Bank of Reconstruction and Development.
has toured Asia and met with exchange
hoping to attract the businesses needed to support more vibrant
capital markets. Discussions in Malaysia were an attempt to
leverage off the country’s Islamic finance
capabilities, and those in Singapore have focused on luring
year BIST signed
with the Tokyo Stock Exchange to
facilitate cross-listing of exchange traded funds.
It’s these arrangements that foreshadow its
intentions for more formal relationships.
we have seen great interest from Japanese companies. I expect
Japan will be the next target of Borsa Istanbul, and then
China," said Kolcuoglu.
will determine its success
search for a strategic partner has occurred against the
backdrop of last year’s
of the Capital Markets Law.
new Capital Markets Law certainly seems to be a natural turning
point – an inflection point – for the
acceleration of these [partnership] initiatives," said
from introducing new fund structures, products and listing
procedures, the revised Law redesigned the
country’s exchanges. It transformed the
government-run Istanbul Stock Exchange into BIST, which will be
privatised via an initial public offering within the next three
also mandated the integration of the gold, derivatives and
stock exchange into a single platform.
two steps are crucial to the government’s goal to
make Istanbul a regional financial centre.
a highly inefficient environment, in terms of
exchanges’ ability to compete with international
peers," said the anonymous source. "So the idea to bring them
under the same framework, and part privatisiaton, will improve
the effectiveness of exchange operations in Turkey."
removal of bureaucracy and seamless integration will play a
large role in the success of any partnership.
what BIST has inherited does not carry the fundamental
qualities it needs to flourish, it is hard to see how a
strategic partner would be able to valuably contribute," said
the anonymous source.
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