concept and operations of an organized securities market in Turkey
have their roots in the second half of the 19th century. The first
securities market in the Ottoman Empire was established under the
name of "Dersaadet Securities Exchange" following the
Crimean War in 1866. Although its operations were suspended during
the war years, this exchange, from time to time, witnessed
substantial trading activity. Dersaadet also created a medium for
European investors who were seeking higher returns in the vast
Following the proclamation of the
Turkish Republic from the ruins of the Ottoman Empire, a new law was
enacted in 1929 to reorganize the fledgling capital markets under
the new name of the "Istanbul Securities and Foreign Exchange
Bourse". Soon, the bourse became very active and contributed
considerably to the funding requirements of new enterprises across
the country. However, its success was clouded by a string of events,
including the 1929 Depression and the impending Second World War
abroad which took their toll in the embryonic business world in
Turkey. During the industrial drive of the 1950's and subsequent
decades, there was a continuous increase in the number and size of
joint stock companies which began to open up their equity capital to
the public. Those mature shares faced a strong and growing demand
from mostly individual investors and some institutional investors.
In Turkey, financial markets have
undergone a considerable degree of positive and promising changes in
the past decade. As a part of the overall liberalization process
which has been in effect since the beginning of the 1980's in the
financial markets, liberalization and market orientation have been
the dominant and leading factors shaping the system. One of the
important steps taken in this period has been the stimulation of the
capital markets by setting a new regulatory framework for the
effective and healthy functioning of the markets.
The present legal framework of the
Capital Markets in Turkey is based on the Capital Market Law enacted
in 1981 and amended in 1992. Together with this law, which mainly
sets the framework for primary markets, there is also the
Decree-by-Law No. 91, enacted in 1983, which constitutes the
regulatory base for secondary markets.
The Turkish Commercial Code, enacted
in 1956, regulates the establishment and operation of companies, and
defines and regulates negotiable instruments in general. Thus, joint
stock companies subject to the Capital Market Law are required to
comply with the provisions of the Commercial Code whenever there is
no provision in the Capital Market Law.
The objective of the Capital Market
Law was to regulate and control the secure, fair and orderly
functioning of capital markets and to protect the rights and
benefits of the investors.
Until the amendment to the Capital
Market Law in 1992, issuing of corporate sector securities was
subject to the approval of the Capital Market Board (CMB), an
institution which began operating in 1982, established by the
Capital Market Law.
With the new provisions introduced by
the amendment to the Law, the previous merit system has been changed
to disclosure, and now the Board decides only on the registration of
the securities to be issued.
After the launching of the relevant
regulation in 1985, the exchange began operating under the name of
the "Istanbul Stock Exchange" in 1986.
The ISE, as Turkey's national
centralized Stock Exchange, performed promisingly well in 1993,
followed by successive good performances in the last couple of
years, and proved to have a considerable weight in the Turkish
financial sector. It also attracted growing interest of foreign
Procedures for investment in Turkish
securities by non-residents have been greatly eased by the
introduction of the concept of portfolio investment as distinct from
foreign direct investment in the regulations governing capital
mobility in Turkey in 1989. As a part of the general liberalization
policies adopted in the financial markets, as well as in foreign
trade, the rules governing capital movements and foreign exchange
transactions have been widely relaxed by the enactment of the
Decree-by-Law No. 32 which replaced then present strict regulations
on these subjects.
Under the present regulations there
are no restrictions on the transactions of foreign investors. The
stock and bond markets are open to foreign investors with guaranteed
repatriation of proceeds.
Transactions on securities are
required to be made through Stock Exchange members, the number of
which declined to 162 by the end of 1994, with 100 brokerage houses,
12 investment banks and 50 commercial banks.
The Istanbul Gold Exchange was opened
in 1994 as a part of the project of "the re-organization of the
gold markets in Turkey and development of a fund-transferring
mechanism within the financial system".
Apart from the above mentioned
developments, " Regulation of the operational and
organizational principles for the Futures and Options
Exchanges" and "Regulation of the Izmir Futures and
Options Exchange" have been launched in 1995.