The Omnibus Law No. 6111 has authorized the CMB for supervision
and surveillance of the over the counter leveraged trading
activities, the so-called forex transactions, as from August 25,
2011. Based on this authorization, CMB has unveiled the curtain on
the draft legislation on leveraged foreign exchange and commodities
trading and has invited comments from the market. Draft
legislation, preparation of which has been on the agenda since
2009, is subject of hot debate as it fully precludes banks from
providing any type of brokerage services in respect of leveraged
The draft should be examined with a view to understand the
approach of the CMB to the leveraged foreign exchange and a
commodity trading as it is not in effect yet.
Below is a brief highlight of the notable aspects of the draft
As per the announcement;
accepting and/or executing leveraged trading orders submitted
by investors (i.e. acting as market maker/utilizing white label
(ii) accepting the orders as a representative of another
institution and directing those orders to the same (i.e. acting as
(iii) promoting the services of another institution in respect
of leveraged trading and acting as agent of that institution for
setting up the contractual arrangement between the institution and
investors (i.e. acting as referring broker),
fall under the scope of the draft legislation.
Physical purchase and sale of assets that may be the subject of
leveraged trading and on-exchange and off-exchange derivative
transactions are excluded from the scope of the draft.
The activity stated in (i) here above can only be conducted by
brokerage firms whereas the activities stated (ii) and (iii) can be
conducted either by brokerage firms or derivative intermediary
institutions. The draft does not define banks as authorized
institutions and accordingly positions brokerage firms and
derivative intermediary institutions as the sole local service
providers in the market.
Intermediaries which will act as introducing brokers may either
represent an authorized local institution or a foreign institution
authorized by the regulator of the relevant country whereas
intermediaries which will act as referring brokers can only be the
agents of authorized local institutions.
Brokerage firms which will perform leveraged trading activities
by directly accepting and/or executing orders shall have an equity
at least ten times higher than the minimum equity amount required
for stock trading, whereas brokerage firms and derivative
intermediary institutions which will perform leveraged trading
activities by accepting orders as a representative of another
institution and directing the orders to the same shall have an
equity at least three times higher than the minimum equity amount
required for stock trading. For the year 2011, the minimum equity
amount required for abovementioned service providers will be TL
8,150,000 and TL 2,445,000 respectively.
The leverage ratio determining the amount of collateral that
should be deposited with the service provider for each transaction
is limited to 100:1. The draft grants the CMB the authority to
revise the ratio and determine different ratios for different type
of assets. In addition, the collateral that shall be deposited with
the authorized institution shall be in the form of Turkish Lira or
The draft envisages detailed and strict requirements for
service providers regarding organizational conditions, IT
infrastructure, risk management, internal control, documentation,
client relations and advertisements.
Institutions currently dealing with leveraged trading
activities are required to apply to the CMB within 30 days as from
August 25, 2011, in order to obtain leveraged trading licenses.
However, since an ordinary institution cannot act as a service
provider under the upcoming regulatory regime, such application
shall, depending on the type of intended services to be provided,
also include an additional filing either for acquisition of a
brokerage firm or for establishing a derivatives intermediary
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
To print this article, all you need is to be registered on Mondaq.com.
Click to Login as an existing user or Register so you can print this article.
Under Regulation (EU) No. 648/2012 of the European Parliament and of the Council of 4 July 2012 on OTC derivatives, central counterparties and trade repositories ("EMIR")...
Some comments from our readers The articles are extremely timely and highly applicable I often find critical information not available elsewhere As in-house counsel, Mondaqs service is of great value
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think youve read our Disclaimer).