Recent development

Continuing Turkey's ongoing effort to harmonize its capital markets rules with international market standards, on March 23, 2016, the Turkish Capital Markets Board (the "CMB") adopted a resolution recognizing that Takasbank’s central counterparty ("CCP") activities comply with the Financial Market Infrastructure Principles ("FMIP") of the Committee on Payment and Market Infrastructures of the International Organization of Securities Commissions ("CPMI – IOSCO"), and designating Takasbank as a "qualifying CCP" (a "QCCP") under Turkish law. As a result, regulators and market participants will consider transactions routed through Takasbank as less risky for capital adequacy and own-funds purposes.

Background

In 2012, CPMI-IOSCO published standards setting out the FMIP for all financial market infrastructures, including payment systems, securities settlement systems, central counterparties, central depository institutions, and trade repositories. Since then, Turkey has worked to harmonize its laws and regulations with these CPMI-IOSCO standards.

To this end, in 2012, Turkey designated Takasbank as the CCP for certain sub‑markets, including the securities lending market, derivatives market and Borsa Istanbul futures and options market, along with its role as the central clearing house. The Borsa Istanbul stock and debt securities markets are also scheduled to be added to this list by the end of 2016 and 2017, respectively.

Next steps

Turkey now seeks to have the European Securities Market Authority ("ESMA") recognize Takasbank as a third country CCP under Article 25 of the European Market Infrastructure Regulation. This will allow Takasbank to provide services to clearing house members and trading platforms within the European Economic Area. Upon such recognition, Takasbank will have QCCP status across the EU. This will similarly improve the perception of its CCP activities across the EU for capital adequacy and own-funds treatment purposes. Given the ongoing US and EU integration of their financial markets infrastructure, ESMA's recognition of Takasbank as a QCCP would benefit Turkey as banks, other financial institutions and investors abroad would be more inclined to engage transactions through Takasbank and, in turn, the Turkish capital markets. This is an opportunity that will contribute to much-needed depth in Turkish capital markets.

Conclusion

Simultaneously with the ongoing overhaul of Turkish capital markets regulations, Turkey has also been harmonizing its capital markets rules and institutions with international standards. To this end, the CMB's decision and subsequent application to ESMA for Takasbank are key to transforming perceptions of its CCP activities and incentivizing both Turkish and, later, foreign banks and other financials institutions to make use of Takasbank as a QPCC.