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Turkey moves towards creating a derivatives marketHergüner Bilgen & Özeke, Istanbul

A significant step towards creating a derivatives market in Turkey was taken when the Capital Markets Law (CML) was amended last December. The term "derivatives instruments" was clarified in Turkish securities legislation, and these transactions are now specifically regulated by Turkish law. The amendment classified derivatives as securities transactions, defined to include futures, options, forward contracts and swaps, and assigned the Capital Markets Board (CMB) as their regulatory body.

Although the legislative hurdles have been lifted, there is still no active exchange for derivative instruments in Turkey. Therefore, all derivatives transactions in Turkey are conducted over-the-counter. In light of the amendments to the CML and the general authority now granted to the CMB, it is likely that the CMB may impose certain restrictions in the future by issuing communiqués in order to standardize derivatives transactions and consequently create an active secondary market. The CMB has already prepared a draft communiqué to establish the fundamental operating procedures for these new exchanges that is expected to be issued by the end of the year.

At present there are no registration requirements for derivative instruments. With regard to licensing, the CML states that any institution acting as an intermediary for derivative instruments is required to obtain an authorization certificate from the CMB and should fulfil the requirements set forth in its 1995 communiqué governing brokerage activities. The 1995 communiqué was replaced by the CMB in September. The new communiqué requires that brokerage institutions must meet certain conditions, including minimum equity requirements and the employment of specialists in derivative instrument operations. In addition, requirements for intermediary agreements with customers are set forth to ensure that customers are provided with adequate information regarding the terms and risks of such transactions.

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