TURKISH DERIVATIVES LAUNCH ON LONDON STOCK EXCHANGE DERIVATIVES MARKET.
In September 2015, London Stock Exchange Derivatives Market (LSEDM) launched trading in Lira denominated futures and options on the BIST 30 Index, Turkey’s leading index. Central counterparty services on these new contracts are provided by LCH.Clearnet.
The launch follows the signing of a partnership agreement between London Stock Exchange Group and Borsa Istanbul earlier in the year, confirming closer collaboration between the two exchanges on derivatives products. This will be followed by the listing of options and futures on selected Turkish stocks. The partnership was sealed at a special signing ceremony held in London and hosted by Ahmet Davutoglu, the Turkish Prime Minister.
London Stock Exchange Derivatives Market
The agreement is an important step in the ongoing development of London Stock Exchange Derivatives Market, presenting our global client base with the unique opportunity to trade and clear Turkish futures and options in Europe. In addition it underlines the Group’s commitment to enhancing London’s position as the world’s most global capital market, whilst working with Borsa Istanbul to help boost its liquidity and appeal to global investors.
Turkey is the latest overseas market to join the Group’s leading international derivatives marketplace. The market already actively trades Russian Depositary Receipts, Index and Dividend derivatives. We also operate a linked order book model with Oslo Børs to enhance Norwegian liquidity, as well as futures and options on the FTSE 100 Index.
The goal with any new product of this type is of course to build liquidity quickly and we are actively seeking support from market making firms. That stems from our strong desire to provide both order book and trade reporting for these products from day one.
Alongside a vibrant local market, Turkish equity derivatives are traded OTC by most foreign investors. In particular, equity swaps and CFDs are still widely dealt and settled bi-laterally but regulatory changes and the implementation of Basel III will inevitably increase OTC trading costs. While CCPs have started clearing selected OTC trades, we believe that the availability of exchange-traded contracts will accelerate the convergence towards centralised clearing with substantial benefits in terms of trading and collateral costs.
The opportunity created by listing Turkish products on London Stock Exchange Derivatives Market will be to facilitate this process and provide the added benefit of efficient price discovery through a central order book. That’s in addition to the flexibility normally associated with OTC products through the availability of flex contracts.
Building Turkey’s global ambitions
As one of the most exciting emerging markets in the world, Turkey is in a key position to help shape the global economic agenda. Furthermore, with a near trillion dollar GDP, export-oriented economy, and dynamic corporations, its capital markets exhibit enormous potential. And London Stock Exchange Group is the natural trading and index partner for Borsa Istanbul as Turkish capital markets rapidly develop into a major regional financial hub, alongside the Istanbul Financial Centre initiative.
Indeed, LSEG has a long history of partnering with ambitious markets around the world, using its expertise in technology and product development to help boost the ability of fast growing economies to access the unparalleled pool of international investor capital in London.
This openness to partner with other markets is a defining characteristic of LSEG, reflecting its commitment to Open Access: partnering with other exchanges such as Borsa Istanbul as it builds on its ambition to become a major regional financial centre. Crucially, this type of partnership is built on the mutual recognition that it will enhance activity on both markets, offering an easier route for international investors.
The growth of derivatives products in emerging markets has remained strong in the last few years and activity has become more global. Increasingly, equity derivatives business is transacted cross-border and no longer dominated by domestic participants. As a result, the co-operation between exchanges in established markets and their emerging country counterparts will further develop this internationalisation, diversify the nature of market participants and facilitate a more open trading model globally.
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