Derivatives in Turkey: A Land of Opportunity?

by Joséphine de Chazournes,  Medy Agami, December 2, 2013
Other
EMEA

Abstract

The Turkish derivatives market is nascent and represents a long-term growth opportunity: 90% of derivatives trading remain OTC, while the listed products catalogue is limited and needs to be enhanced.

In the report Derivatives in Turkey: A Land of Opportunity? Celent analyzes the clear growth opportunity that Turkish capital markets represent as not just an emerging European country but also the potential gateway and financial center for Central and Eastern Europe, Turkic, the Middle East, and North Africa.

The Turkish government’s economic goals are so ambitious that they supersede its politics. Indeed, to become the 10th largest global economy by 2023, Turkey needs foreign investor commitment, and it needs to modernize its financial markets with new infrastructure, technology, regulation, and taxation. Compared to its theoretical peers, Turkey has strong GDP growth, as one would expect, and well-controlled government debt, but a rather underdeveloped financial sector.

“Looking at financial markets and specifically at derivatives, much needs to be done to make Turkey a modern and significant country,” says Medy Agami, Analyst with Celent’s Securities & Investments Group and coauthor of the report. “Onshore buy side flows remain small and often captive. This is considered a nascent segment in Turkey; growth started in 2006 after tax advantages of bonds/deposits were removed. More needs to be done here to remove tax barriers, incentivize investing in Turkey, and help Investors reduce their cost of investments.”

"The recent consolidation of Borsa Istanbul into a single entity that provides all asset classes of products is a winning strategy, considering the low margin that equity cash trading provides, and the strategic partnership project signals the strong commitment that the local authorities have to make this market evolve quickly," adds Joséphine de Chazournes, Senior Analyst with Celent’s Securities & Investments Group and coauthor of the report. “But, to enable the growth of the derivatives market much needs to be done to educate market participants, be they coprorates, buy side, or retail investors.”

In this report, Celent provides insight into the potential evolution of the Turkish derivatives market and the opportunities this may entail for the next few years for local and foreign market players, be they infrastructure providers, banks, buy side firms, or vendors.

Celent is a research and advisory firm dedicated to helping financial institutions formulate comprehensive business and technology strategies. Celent publishes reports identifying trends and best practices in financial services technology and conducts consulting engagements for financial institutions looking to use technology to enhance existing business processes or launch new business strategies. With a team of internationally based analysts, Celent is uniquely positioned to offer strategic advice and market insights on a global basis. Celent is a member of the Oliver Wyman Group, which is a wholly-owned operating unit of Marsh & McLennan Companies [NYSE: MMC].

Media Contacts

North America
Michele Pace
mpace@celent.com
Tel: +1 212 345 1366

Europe (London)
Chris Williams
cwilliams@celent.com
Tel: +44 (0)782 448 3336

Asia (Tokyo)
Yumi Nagaoka
ynagaoka@celent.com
Tel.: +81 3 3500 3023

Table of Contents

Executive Summary

1

Introduction

3

Market Overview

4

 

Economic Outlook

4

 

Political Outlook

6

Market Segments

8

 

Corporates

8

 

Banks

9

 

Buy Side

10

Turkish Derivatives Market Structure

13

 

Capital Markets Infrastructure in Turkey

13

 

Derivatives

14

 

Clearing

19

Market Regulation and Taxation

20

 

Brokerage and Exchange Regulation

20

 

Taxation

22

Opportunities in Derivatives

24

 

For Corporates

24

 

For the Buy Side

24

 

For Retail

25

 

For HNWI

25

 

For Algorithmic and High Frequency Trading

26

 

For Market Participants

26

Conclusion

28

Leveraging Celent’s Expertise

29

 

Support for Financial Institutions

29

 

Support for Vendors

29

Related Celent Research

30

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