The Turkish stock exchange, Borsa Istanbul (BIST) is establishing a swap market to carry out over-the-counter transactions between financial market institutions in one organized market.
This step to simplify liquidity management and increase transparency, would pull the over-the-counter transactions from the London market to this central market in BIST and help monitor financial markets more closely.
The market would also help manage risks that occur as a result of the positions that are opened in the underlying assets, such as exchange rates and interest rates, more effectively. It will also create a liquid market where the risks are cleared.
In terms of investors, with the Istanbul Clearing, Settlement and Custody Bank (Takasbank) as the central counterparty, it will be possible to create a more reliable environment so that the institutions that have access to the stock market can manage their risks more effectively. Institutions that have access to the stock market in the financial markets will be able to manage risks caused by incompatibilities, such as maturity, exchange rate, and interest type differentiation, more effectively.
In a written statement BIST said that "the swap market, which is one of the most active markets in global financial markets, has started to be established in our stock market to serve all financial sector participants, especially our banks."
Accordingly, Takasbank, as the central counterparty, will carry out the clearing of the transactions in this market and will provide risk and guarantee management services.
"The commissioning of the swap market in our stock market will pave the way for such transactions, which are often carried out over-the-counter, to be carried out in our country under the guarantee of an organized market," the statement read.
With the swap market, which is planned to be realized for the foreign exchange markets in the first place, BIST will continue to work on new products and markets, the statement noted.
"The projects that will increase the depth of our existing derivative markets and their added-value to the country's economy will be accelerated," it added.
It stated that basic issues such as market makers and liquidity provision in the market operation will be explained to the public through consultation with all stakeholders.
The Banking Regulation and Supervision Agency (BDDK) has recently set limits for banks in Turkey to have up to 25 percent of the bank's last calculated equity as the sum of swaps and similar transactions with residents abroad.
"If this restriction is relaxed for transactions in BIST, the banks may be relieved," said market experts, stressing that transactions between institutions themselves will create transparency in terms of instantaneous visibility in this organized market.
Analysts also pointed out that as institutions like BIST and the BDDK will carry out the flow of information to the central bank very quickly, the central bank will be more dominant in the market and will be able to act faster.
The Capital Markets Board (CMB) said that data on these transactions will be collected by Central Registry Agency (CRA) and the necessary regulations will be made quickly, in order to transparentize the over-the-counter derivative transactions and monitor the risks.
The CMB announced that the working principles of the Central Security Depository Institution (MKK) were prepared and that the work on the reporting of data was completed in coordination to a great extent.
The statement on CMB's website highlighted that the works carried out under its coordination regarding the over-the-counter derivative transactions to be collected in the CRA, within the scope of the Capital Markets Law, have been completed "to a great extent," while the data will be opened to the joint access of all regulatory and supervisory institutions.
"The reporting of the transactions in the over-the-counter market will be made promptly to CRA within the framework of the format to be established by taking the views of the Treasury and Finance Ministry and related institutions into account until the required data processing infrastructure is completed," the statement said.