JUNE 2013 - FEAS

FEDERATION OF EURO-ASIAN STOCK EXCHANGES ANNUAL REPORT JUNE 2013İSTANBUL MENKUL KIYMETLER BORSASI2012 has been a year of transformation forİMKB.İbrahim TurhanChairman & CEOBeginning of year 2012 marked the launchof a new roadmap for İstanbul MenkulKıymetler Borsası (İMKB) to ensure improvedperformance of capital markets in line withthe fine performance exhibited recently byTurkish economy. The most significant part ofthis roadmap entails transformation of İMKBfrom a mutual public entity into a profit-makingcompany in harmony with the trends observedin the global arena over the last years.The new Capital Markets Law, which enteredinto effect on December 30, 2012, is theforemost factor to contribute to İMKB’sstructural change. The new legislation launcheddemutualization process, as well as integrationwith İstanbul Gold Exchange and TurkishDerivatives Exchange, which will bear fruit in2013.With its US$ 309 billion market capitalizationas of end 2012, İMKB has also set a goalto increase the depth of the market and toaugment the amount of funds channeledto Turkish economy. Turkey’s current GDP,approximately US$ 770 billion, is expectedto double by the year 2023 (the centennialanniversary of the Turkish Republic) and İMKBplans to reach a market capitalization around50 to 60 percent relative to GDP in line withglobal average.Product range has been diversified in 2012.Equity Repo Market and Futures and OptionsMarket were launched. In addition to SingleStock Futures and Options, SovereignSukuk trading has commenced. Technicalinfrastructure of Equity Market Trading Systemwas improved, resulting in better marketefficiency. Closing session was introduced asan important factor for efficient price formation.Investor-based surveillance system came intoeffect, which is highly instrumental in ensuringthe realization of trades in an open, orderly andfair manner and fighting market abuse.The IPO Campaign maintained its momentumand 26 companies went public in addition to235 corporate debt issuing in 2012. InvestorAwareness Campaign activities were initiatedand carried out throughout the year to increasefinancial literacy and raise awareness aboutcapital markets.Another major component of the Exchange’sstrategy has been the focus on internationalcooperation. In line with its pivotal role inİstanbul Financial Center project, İMKBembarked on an extensive internationalreach out to establish and strengthen tieswith exchanges in the region and globally.Cooperation agreements have been signedwith exchanges of eight different countries.These agreements envisage fosteringcollaboration between exchanges, as wellas sharing of knowledge, information andbest practices. İMKB also initiated strategicpartnerships on connectivity with EgyptianExchange and on cross listing of ETFs withJapanese and Korean exchanges. Furthermore,İMKB and NYSE Liffe agreed on the launch offutures and options contracts based on selectstocks from İMKB 30 Index.All in all, focusing on the long-term results,nurturing the marketplace, diversifying itsportfolio, facilitating innovation, and reachingout for international collaboration İMKB isattempting to transform itself into a more agile,efficient and effective exchange. On its way tobecoming Borsa İstanbul, İMKB is committed toachieving its goals and creating higher value forall stakeholders.HISTORY AND DEVELOPMENTIn 1981, Capital Market Law was enacted andone year later, Capital Markets Board wasestablished. İMKB, formally inaugurated in 1985,has an origin going back to early 1870s. As animportant milestone, new Capital Markets Law,promulgated in 2012, brought many changesto Turkish capital markets, including theestablishment of Borsa Istanbul.İMKB provides a fair and transparentmarketplace for trading of a wide variety ofsecurities from equities, exchange tradedfunds, warrants to government bonds, treasurybills, corporate debt securities, money marketinstruments (repo/reverse repo), derivativesand foreign securities. Currently, there are sixmarkets operating at İMKB: Equity Market, DebtSecurities Market, Foreign Securities Market,Emerging Companies Market, Free TradePlatform and Futures and Options Market.İMKB was recognized as a “DesignatedOffshore Securities Market” by U.S. Securitiesand Exchange Commission in 1993, andwas designated as an “appropriate foreigninvestment market for private and institutionalJapanese investors” by Japan Securities DealersAssociation in 1995. İMKB has been approvedby the Austrian Ministry of Finance as a regulatedmarket in accordance with the regulations ofAustrian Investment Fund Act in 2000. Foreigninvestors now account for a substantial volumeof daily trading and hold around 65% of thepublicly-held stocks in their portfolios amountingto US$ 78 billion, as of end-2012.İMKB currently owns 32.63% of İMKB Settlementand Custody Bank, 30% of the Central RegistryAgency, 18% of the Turkish DerivativesExchange and 10% of Capital Market Licensingand Training Agency of Turkey. On theinternational level, İMKB has participations in theKyrgyz Stock Exchange, Baku Stock Exchangeand Sarajevo Stock Exchange with stakes of24.51%, 5.26% and 5% respectively.FUTURE OUTLOOK• İMKB is steering a joint initiative for creatingan order routing platform to serve as asingle access point from and to local aswell as regional exchanges. This platformwill consolidate the liquidity of local andregional markets and as a consequence,contribute to the global recognition of thelocal securities industry.• İMKB is planning to integrate the submarketsof Equity Market, which are namelyNational, Second National, InstitutionalProducts and Watchlist market.• İMKB will finalize FixAPI, FIX Protocol basedorder routing infrastructure, in 2013.• Recent regulatory change regarding pensionsystem is expected to cultivate investor baseand assets under management.• Regarding public disclosure İMKB willadapt itself to the new legal environment.Actual cooperation with Central SecuritiesDepository (MKK) in Public DisclosurePlatform will be furthered.• Endeavors continue to create electronicsession to facilitate more effective tradingin different geographical locations andeliminating the effect of time difference.CAPITAL MARKET DEVELOPMENTAND ECONOMIC OUTLOOKTurkish economy, while being influenced byexternal factors such as global financial crises,continues to grow steadily and the averagegrowth rate for the last decade was aroundfive percent. In 2012, export figures were verypositive for Turkish economy. In 2013, similarrole is expected from private consumption bythe triggering effects of falling interest rates.In addition, public sector consumption furtheradds to growth. Consumer credit expansion aswell as increase in business lending confirmsgrowth in consumption and investment.PAGE 51