A Special Focus on CIS Countries

With the entry into the force of the Capital Markets Law No. 6362 ("CML") on December 30, 2012, the legal landscape of the Turkish capital markets has dramatically changed. The CML was enacted due to reasons such as (i) harmonization with the European Union legislation, (ii) the new Turkish Commercial Code and its provisions applicable to joint stock companies and (iii) the fact that no significant amendment was made to the previous Capital Markets Law no. 2499 since 1999 despite the growing complexity of the financial markets and the increasingly interconnected global financial institutions. 

The legislative changes constitute only one dimension of the desired change for the liberalization of the Turkish capital markets, which has been officially set under the Istanbul International Financial Center Project within the scope of the government agenda "2023 Vision".

Another important aspect of this liberalization trend is the incorporation of Borsa Istanbul, currently the only stock exchange in Turkey, as a private company (in the form of a joint stock corporation), which brings together all the exchanges (Istanbul Stock Exchange, Istanbul Gold Exchange and Turkish Derivatives Exchange) and operating in the Turkish capital markets under a single roof.

As a part of Borsa Istanbul becoming an international hub, Nasdaq's purchase of 5% of Borsa Istanbul's shares was the initial step of its globalization, which aims to increase the competitiveness of Borsa Istanbul in international capital markets. Globalization efforts of Borsa Istanbul continue by the launch of trading in Turkish equity index derivatives products on London Stock Exchange Derivatives Market as of September 2015.

In addition to the institutional and operational transition that Borsa Istanbul is going through, ListingIstanbul1 initiative of Borsa Istanbul also plays a vital role in its active efforts to increase the number of listed foreign securities.

An important legal change supporting Borsa Istanbul's current stance has occurred in the Communiqué on Foreign Capital Market Instruments and Depositary Receipts and Foreign Investment (the "Communique") by an amendment entered into force on January 22, 2015. According to the amendment, foreign governments and foreign governmental institutions can now issue capital markets instruments in Turkey. In order to ease the legal process, the Capital Markets Board ("CMB") regulated that it has sole discretion to determine the principles regarding the sale of foreign capital market instruments by foreign governments and foreign governmental institutions in Turkey. Additionally, in order to provide an incentive, the CMB has also set the issuance fee as 0.

Within the scope of the globalization trend, Borsa Istanbul gives a special focus on Commonwealth of Independent States ("CIS"). Upon Russia's actions towards Ukraine and the annexation of Crimea by Russia, USA and EU have imposed sanctions and expanded the measures taken against Russia. There are also sanctions imposed on Belarus and Ukraine. In this current landscape investors from CIS region are seeking alternative markets. Despite all the pressure on Turkey to support the sanctions enacted by EU, the Turkish government has rejected this demand.

Considering all the recent legislative amendments favoring foreign investors and the ongoing relations between Turkey and the CIS countries, it is evident that the Turkish capital markets provide a fertile and secure investment environment and makes it highly attractive for CIS investors. For the issuance of foreign capital markets instruments by both foreign governments and foreign private institutions, Borsa Istanbul offers a promising investor climate with reliable capital markets and regulatory environment. The fact that Borsa Istanbul is a shareholder and has board seats in the stock exchanges of two of the CIS countries, namely, Kyrgyzstan and Azerbaijan demonstrates its continuous efforts to attract foreign investors from the CIS region.

Footnote

1  http://www.listingistanbul.com/

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