• It is the spirit and not the form of law that keeps justice alive.
    Earl Warren

CAPITAL MARKETS BOARD’S RECENT AMENDMENTS REGARDING THE FX MARKETS IN TURKEY

Turkish Capital Markets Board (CMB) has introduced a couple of amendments to its Communiqué on Principles for the Investment Services, Activities and Ancillary Services No. III-37.1 in relation to the leveraged forex trading transactions by setting a minimum margin of TL 50,000 in leveraged transactions and reducing the leverage from 100:1 to 10:1.

 

CMB also allows a transition period of 45 days for the positions that do not comply with the latest amendment.

 

Minimum margin of TL 50,000

 

CMB brought a minimum margin of TL 50,000, which is also referred to as the collateral that forex traders use to invest in various financial instruments, in leveraged trading transactions. Accordingly, in order to initiate leveraged transactions, a minimum margin of TL 50,000 or an equivalent amount of foreign currency must be deposited in the account.

 

If the collateral amount falls below TL 50,000 (or foreign currency equivalent of TL 50,000) as a result of withdrawal or transfer to another corporation, at any time, prior to starting transactions or after executing transactions, then the position cannot be opened.

 

However, if the investor suffers from loss following the forex transactions, and as a result of this, the collateral amount falls below TL 50,000 (or foreign currency equivalent of TL 50,000), the investor will be able to carry on further transactions.

 

Leverage ratio as 10:1

 

The leverage provided in FX transaction allows forex traders to gain high returns. It signifies the ratio for positions that can be bought in return for collateral that is deposited to engage in transactions. In this respect, the leverage that can be imposed on the positions may not exceed 10:1 as per the recent amendments of the CMB.

 

According to these amendments, the minimum leverage shall be stipulated in the contract to be signed between forex brokers and customers. In order to change the leverage following the execution of the contract, the customer’s approval which can be obtained through any means of electronic media, is required.

 

CMB has the authority to change this ratio and determine leverage ratios based on the asset when it deems necessary.

 

CMB has declared that the main purpose of these amendments is to protect retail investors from losses in a decision that could lead some investors to close their positions for good and leave the market. It is also explained by some of the governmental authorities that the leverage has been reduced with the aim of protecting investor losses and preventing speculative transactions on foreign currencies by minimizing the risks arising from excessive volatility.
Practice Areas:
#Banking and Finance Law
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