Turkey experiences rush to derivatives exchange
Posted by meb at February 5th, 2008
The transaction volume at the Turkish Derivatives Exchange (TurkDEX), which has 25,000 accounts, continues to increase and is expected to reach YTL 240 billion this year as opposed to 2007′s YTL 118 billion.
The interest in TurkDEX is increasing rapidly, said Hakan Yamaçoğuz, deputy director for domestic markets at İş Investment. The number of open accounts in TurkDEX, increased from 11,231 to 25,000 in 2007 compared to the previous year, an increase of more than 100 percent, said Yamaçoğuz.
We expect that derivative transactions of stocks will boost TurkDEX’s transaction volume three- or four-fold on average. A second turning point for TurkDEX will emerge once futures contracts on stocks in the IMKB-30 start trading at TurkDEX in line with investors’ needs and demands in 2008, he added.
Founded Feb. 4, 2005, TurkDEX was the world’s fastest-growing derivative instruments market with a 273 percent increase in 2006, according to a survey conducted by the Futures Industry Association (FIA).
Tax creates obstacles
According to the latest TurkDEX data, foreign investors’ share in aggregate transaction volume was 30 percent in December, said Yamaçoğuz. “We think that foreign investors trade 70 percent of the aggregate open position in TurkDEX Index agreements in parallel with stock market of the Istanbul Stock Exchange (IMKB).”
Banking and Insurance Transactions Tax is among the most important obstacles that prevent the development of TurkDEX, said Yamaçoğuz. Due to the tax, transaction volume particularly in currency contracts remains rather limited, he said. The healthy conduction of intermarket arbitrage is crucial for the development of TurkDEX, said Yamaçoğuz. Should the arbitrage mechanism malfunction, the related TurkDEX contract will be short-lived, he said.
Changes should be introduced in tax laws in order to increase transaction volume in currency contracts, said Yamaçoğuz. In 2007, the expected participation could not be attained in interest rate contracts, which are the leader of futures contracts in overseas markets, said Yamaçoğuz. The same goes for commodity, YTL/currency and IMKB 100 Index contracts, he added. In order to attain a revival in interest rate contracts, market makers in the IMKB bond market should conduct transactions more actively, Yamaçoğuz said. New arrangements should be made concerning bond loan transactions and short selling in spot market, he added. In order to increase foreign interest in agreements on commodity and financial assets, a ‘give-up’ project should be implemented in TurkDEX urgently, Yamaçoğuz said.
İş Investment, which is among the founding partners of TurkDEX, had a transaction volume of YTL 39.9 billion last year, said Yamaçoğuz. With a market share of 16.90 percent, İş Investment had a transaction volume of YTL 9.4 billion in TurkDEX in 2006 and YTL 1.5 billion in 2005.
Source: Turkish Daily News
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