Turkey: Brief memorandum Regarding The "Margin Trading", "Short Selling" And "Borrowing and Lending" Transactions of CMI

(OG: 14.07.2003 – V/65)
Last Updated: 25 November 2004
Article by Vural Günal


    1. Authorized Institutions
    2. 1.1. Intermediary Institutions ("I.I.")
      1.2. Banks
      1.3. Establishment of the Lending and Borrowing Market
    3. Organization for I.I.s
    4. Capital Markets Instruments ("CMI") That May Be Subject to Three Transactions
    5. General Transaction Limits
    6. Private Transaction Limits
    7. Credit Deemed To Be Extended to (Only) One Customer
    8. Obligation to Provide Collateral Within the Clearing Period
    9. Approval of the "Purchase Order" Without Collateral
    10. Framework Agreements
    11. Assets that May Be Deemed as Equity
    1. Description
    2. Equity Capital
    3. Reservation of the CMI
    4. Obtaining of Credit by I.I. For the Purpose of Extending Credit to Customers
    1. Description
    2. Principles
    3. Prohibited Persons
    1. Description
    2. Lenders
    3. Principles



1. Authorized Institutions:

1.1. Intermediary Institutions (the "I.I."):

"Margin Trading", "Short Selling" and "Borrowing and Lending" transactions of Capital Markets Instruments may be undertaken by the I.I.s, who have the authorization certificate for buying and selling of capital market instruments, WITHOUT OBTAINING THE PERMISSION of the Capital Markets Board (the "CMB").


(i) has the equipment and personnel

(ii) the CMB does not veto within 30 days.

1.2. Banks :

The credits, excluding limits, provided by banks "directly" to the CUSTOMERS in exchange for the assets that are deemed as EQUITY CAPITAL in the Communique, are subject to the Communique.

1.3. Establishment of the Borrowing and Lending Market:

I.I.s, Banks and TAKASBANK (the Settlement and Custody Bank of the Republic of Turkey) may undertake BORROWING and LENDING transactions without the permission of the CMB, provided that they have the Purchase-Sale authorization certificate. Takasbank establishes a market for the borrowing and lending transactions. The market is a part of Takasbank. The CMB approves the entry requirements for the market.

2. Organization for the I.I.s :

(i) "Appointment of 2 persons"

For the purpose of implementation and supervision of all three transactions, one OFFICER and one ASSISTANT GENERAL MANAGER shall be appointed to monitor:

  • The compliance of the EQUITY CAPITAL ratios with the LAWS and the FRAMEWORK AGREEMENT,
  • The "daily" follow-up and reporting of the CUSTOMER RISKS.

(ii) "Establishment of a Credit Committee"

I.I.s shall appoint a CREDIT COMMITTEE presided by a responsible member of the Board of Directors and comprised of a General Manager and an Assistant and the relevant unit managers; duties and powers shall be determined according to the internal monitoring procedures.

3. CPIs That May Be Subject to the Three Transactions:

  • Ratios among the CPIs traded in the stock exchange, that shall be subject to the Margin Trading and Short Selling transactions shall be LISTED by the STOCK EXCHANGE, approved the CMB and be published. CMB has the authority to remove from the list.
  • Government Local Debenture Bonds ("GLDB") Market Makers may conduct BORROWING and LENDING transactions with the MEASURE papers determined by the TREASURY.
  • "Banks and I.I.’s who are not authorized to be GLDB Market Makers may only LEND using the GLDB; but cannot borrow.

4. General Transaction Limits :

PRINCIPLE: (for the Intermediary Institutions):

  • The sum of "the total credit extended by II" + "the SHORT SELLING price sold in the name of the Customer" + "the SHORT SELLING price sold in its own name", excluding the vote, MAY NOT EXCEED twice the average of the EQUITY CAPITAL calculated for the previous THREE MONTHS.
  • The OPINION of the Central Bank of the Republic of Turkey (the "CBRT") shall be obtained in order to MODIFY these transaction limits. (In our opinion, this obligation is for the "formula principle"; not on the basis of I.I.; moreover, CMB can decrease the limit and even prohibit it. (Last paragraph of Article 7).

5. Private Transaction Limits:


The AMOUNT of CREDIT extended to a customer may not exceed the 10% of the average EQUITY CAPITAL amount.


During the credited transactions, in the event the "continuation collateral" is kept at a minimum of 50%, the credit amount extended to ONE customer may be increased up to twice that extended. (Excluding the I.I.s that are subject to the strengthening of capital provision of the capital adequacy regulation).

6. Credit Deemed To Be Extended to (Only) One Customer :

The SUM OF THE CREDITS extended to the following is deemed to be extended to ONE CUSTOMER:

- (One person + spouse + infants in guardianship), (partnerships in which these persons participate with unlimited liability) or (partnerships within which they are Members of the Board of Directors, General Manager or Assistant General Manager)

- Partnerships whereby these persons OR a legal person PARTICIPATE(s) in at least 25 % of the capital.

- Those who act JOINTLY in the buying and selling of securities for a number of reasons.

7. Obligation to Provide "Collateral" Within the Clearing Period :

Principle : A customer- is required to possess a minimum net worth of 20% (twenty percent) of a SHORT CLEARING POSITION that may emerge at a certain time, as a result of the purchase and sale transactions of securities, the clearance of which has not been realized.

If such amount of collateral cannot be REALISED, the new order "shall not be accepted" and ASSETS equaling to the required amount shall be sold ex officio at the FIRST FOLLOWING SESSION.

8. Approval of the "Purchase Order" Without Collateral:

I.I. may APPROVE the purchase order "without obtaining collateral" if I.I.:

  • Has investigated whether the customer has the ECONOMIC ABILITY to fulfill its cash liabilities,
  • Can certify this ability,
  • Has taken the AFFIRMATIVE opinion of the credit committee,
  • Has extended a LIMIT, not exceeding the 20% of the average equity capital, to the customer through the Board of Directors, - PROVIDED THAT THE CLEARING PERIOD HAS NOT ELAPSED.

However this issue must have been addressed in the FRAMEWORK AGREEMENT.

9. Framework Agreements:

These Agreements are:




The MINIMUM contents of these Agreements, execution of which are compulsory, are determined by the CMB.

Framework Agreements shall not contain the following:

i. Provisions that are INCONSISTANT with the laws and regulations,

ii. Provisions that seriously DAMAGE the rights of customers,

iii. Provisions that provide ONE-SIDED, extraordinary rights in favor of IIs,

iv. Provisions that burden the Customer with the "proof" of orders.

10. Assets That May Be Deemed As Equity Capital :

i. Cash TL and Convertible foreign exchange (that is considered as convertible by the CBRT)

ii. CMIs that are within the LIST

iii. Type (A) and (B) investment fund ("IF") participation records

iv. Government Bonds and Treasury Bonds provided that they are traded at the Stock Exchange, gold and other valuable metals that are traded at the Gold Stock Exchange

iv. Other CMIs that shall be deemed as appropriate by the CMB,

Shall be deemed as Equity Capital in the ratios shown in the Communique. Cash, Government Bond ("GB"), Treasury Bond ("TB"), Type B Participation Certificate ("PC"), 100% gold ISE National100 securities, 90% of the Type A PC, 75% of the other securities shall be deemed as equity capital.



Margin trading transaction is the purchasing of CMI by the Customer through the use of credit.

Whether a transaction is "credited" is determined at the stage of "order".

2. Equity Capital:

- The Customer is obliged to invest an EQUITY CAPITAL of 50% at the beginning.

- During the continuation of the transactions, the ratio of the equity capital must AT LEAST be 35%.

- IIs are obliged to calculate the equity capital amount for each working day.

- In the event that the equity capital falls below 35%, the ratio shall be increased to 50% within TWO WORKING DAYS. If the deficiency in the Equity Capital is not eliminated, the credit account shall be closed by selling the CMIs.

3. Reservation of CMIs:

CMIs "obtained through credit" and "invested as equity capital", shall be reserved in the name of the II;

CMIs as collateral for the margin shall be reserved in the name of the margin provider; at TAKASBANK.

4. Obtaining of Credit by I.I. For the Purpose of Extending Credit to Customers:

I.I.s are not credit establishments; however the Communique enables the I.I.s to obtain credit in order for them to provide credit to their customers. I.I.s may obtain credits from:

  • Banks
  • Takasbank
  • Institutions and establishments envisaged by the CMB
  • Organized loan markets.

Credit extenders receive the CMIs provided to them as against such credit, as COLLATERAL for the credit only; they cannot sell, grant as collateral and lend such CMIs.


1. Definition:

- Short Selling Transaction means SELLING or GIVING OF THE ORDER TO SELL the CMIs that are not actually owned.

- The fulfillment of the "clearing obligation" with regard to the sale through BORROWED CMIs, also means SHORT SELLING.

2. Principles:

- It must be notified –at the time of the order- to the I.I.s "in writing" that the transaction is a SHORT SELLING. In that case "Short Selling Order" can not be given ORALLY.

- If the customer declares the existence of the "asset", then the existence of "short selling" cannot be asserted; however the customer shall be responsible for such declaration, I.I.s shall also be responsible for the investigation of the truth of this declaration.

- The customer shall deposit an equity capital of 50% "in the beginning", and of 35% during the continuation of the transactions; any deficiency shall be eliminated when arises. Excess equity capital may be withdrawn from the account "in cash".

- When notifying the STOCK EXCHANGE, the order has to be clearly specified as a "short selling order".

- Short Selling Transaction shall be effected at a price ABOVE "the price at which the last trade of the same CMI is effected".

3. Prohibited Persons:

  • BoD Members
  • High Ranking Managers
  • Partners with 10% and more shareholding
  • Those acting "jointly" with such persons
  • SPOUSEs and those coming within the Guardianship of these persons of a company which has issued CMIs, CANNOT carry out SHORT SELLING transactions with these CMIs.


1. Description:

This transaction means the lending of CMIs by the LENDER to the BORROWER for a certain period and return of an equal number of the same type of CMIs to the lender, within the principles determined in the framework agreement.

2. Lenders:

I.I.s may lend their CMIs to other persons or institutions from:

i. portfolios they keep in their own names and accounts,

ii. portfolios of customers or other portfolio owner institutions (provided that AUTHORIZATION is given by such persons).

3. Principles:

- "Dividend" or "interest" of the CMI belongs to the LENDER.

- The Preemption Right, is determined in the framework agreement FREELY.

- the borrower provides EQUITY CAPITAL to the lender not less than the 100% of the current (market) value of the CMI.

- In the event that the Equity capital falls below 100%, the deficiency in the "equity capital" is required to be eliminated "on the same day": if not, the situation of the users of equity capital shall be assessed.

- The LOAN generated by borrowing transaction shall "mature" in cases of "NON-ELIMINATION of Deficiency"; "Termination of the Borrowing PERIOD" and "Removal of the CMI from the LIST".


- Customers who fail to meet their CLEARING OBLIGATION or OBLIGATION to ELIMINATE the DEFICIENCY in the EQUITY CAPITAL at least THREE times in three months, shall be notified to the STOCK EXCHANGE within 2 working days. The Stock Exchange SHALL ANNOUNCE such persons.

- If the CASH or SECURITIES in the account are not "adequate" on the trading day, the concerned customer’s orders shall not be accepted by the I.I.s for a term of SIX MONTHS.


The effective date of the Communique is 01.01.2004.

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.

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