Turkey's derivatives bourse opens to US citizens

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Turkeys derivatives bourse opens to US citizens
Oluşturulma Tarihi: Şubat 25, 2009 00:00

İZMİR -A recent application to the Commodity Futures Trading Commission, or CFTC, the regulatory authority that arranges futures contracts in the United States, opens way for individual US investors to trade on futures contracts in Turkey.

The path is opening for U.S. investors to put money into the Turkish Derivatives Exchange, or VOB, based in the Aegean city of İzmir.

The Commodity Futures Trading Commission, or CFTC, the regulatory authority that arranges futures contracts in the U.S., was applied to in order to enable U.S. individual investors to trade on VOB contracts. A deal has been made with Sidley Austin, the U.S. law firm, where U.S. President Barack Obama did his internship, to represent VOB under the roof of CFTC.

CFTC is expected to make a decision in six to nine months. Following the approval of Turkey’s Capital Markets Board, or SPK, equity index futures contracts will start at the VOB in the upcoming months.

Working on option contracts, which allow selling and buying an asset for a certain duration and at a fixed price, VOB is aiming to introduce the instrument to investors by the end of the year. Moreover, VOB is preparing to market the Contracts for Difference, or CFD, product as an alternative to the FX market.

CFDs are contracts between two parties, typically described as "buyer" and "seller", stipulating that the seller will pay the buyer the difference between the current value of an asset and its value at contract time. If the difference is negative, then the buyer pays to the seller instead.

It is hedge funds that generally make transactions at the VOB, said VOB Managing Director Çetin Ali Dönmez. However, there are some limitations on individual U.S. investors to invest in instruments outside the United States, he noted. In order to remove this limitation, the bourses of other countries with index transactions have applied to the CFTC and the body made decisions on similar issues before, said Dönmez. VOB applied for a decision three months ago, he added.

A short time ago, 10 top-volume stocks of the Istanbul Stock Exchange’s IMKB-30 Index were suggested to the SPK, Dönmez said, adding that the board’s decision was pending.

However, he said they did not agree with the IMKB’s concerns that equity futures transactions may affect the spot market. FX markets should be supervised in Turkey, Dönmez said, adding: "Nobody undertakes its supervision. If an investor is aggrieved, there will be problems. SPK is after this issue; however, the government should make an arrangement concerning this issue."

As an alternative to the FX market, CFD will be brought to Turkish capital markets, Dönmez said. FX markets’ monthly transaction volume is predicted to be around $20-$40 billion, he said, adding that the aim was to draw a substantial proportion of this volume, as well as daily exchange transactions, to VOB.

Commenting on the impacts of the global crisis on VOB, Dönmez said with the fluctuation in global markets in the last quarter of 2008, particularly currency futures transactions, volume has risen.

Average daily transaction volume on a monthly basis was 850 million Turkish Liras as of February, Dönmez said. The number of transactions, which stood at 3.7 million in January 2008, rose to 6.7 million this January.

Dönmez also claimed that former IMKB Chairman Osman Birsen did not want a derivatives exchange market at the IMKB. The market was opened upon the will of the International Monetary Fund, or IMF, he said. "The derivatives exchange was opened in 2001 at the IMKB as the IMF shifted to a floating rate regime and wanted to see the launch of exchange futures."
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