Turkey expected to act to prevent market manipulation, margin call problems

Turkiye Vakiflar Bankasi TAO

23/09/2022 15:08

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      Erdogan chairing meeting on Friday set to consider such
issues
    

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      Shares fell sharply in last two weeks due to margin calls
    

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      Future contracts may be reduced
    

  
    By Ebru Tuncay and Can Sezer
       ISTANBUL, Sept 23 (Reuters) - Turkish authorities are
expected to make stock market regulatory changes within a few
days to prevent market manipulation after sharp falls in prices
due to margin calls on futures positions, market participants
and analysts said.
    They said the issue was likely to be among those discussed
at a meeting which President Tayyip Erdogan convened on Friday
afternoon with top economy officials, with steps potentially
including a reduction in the number of futures contracts.
    Led by banking stocks, Istanbul shares fell 36% in the last
two weeks, eroding a 150% surge in the last two months. The
sudden slide has started to cause concern in the government in
Ankara.  urn:newsml:reuters.com:*:nL8N30L3KB
    Last week's falls tripped Borsa Istanbul circuit breakers
for Vakifbank  VAKBN.IS , Akbank  AKBNK.IS , Albaraka Turk
 ALBRK.IS , YapiKredi  YKBNK.IS  and Garanti BBVA  GARAN.IS ,
leading to trade in them being temporarily suspended.
    "Such moves must definitely be prevented from happening," a
senior economy official said. "Alternative steps are being
considered. Which steps will be decided soon."
    A brokerage house manager, who declined to be named, said
the Treasury may coordinate changes in regulations to prevent a
repeat and "in all probability, they won't wait till next week."
    Steps may be taken to limit futures contracts on the shares
of small or medium-sized companies with low trading volume
vulnerable to price manipulation, analysts said.
    The Treasury and Borsa Istanbul directed questions towards
regulatory authorities. The Capital Markets Board did not
immediately respond.
    "FIRST MAJOR CRISIS"
    After sharp declines, Turkey's largest bank stocks  .XBANK 
steadied this week, but falls continued in stocks such as
Sekerbank  SKBNK.IS , TSKB  TSKB.IS  and Is GYO  ISGYO.IS .
    One source said the futures market positions were largely
held by investors trading with five brokerage houses and that if
investors can't meet the collateral requirements they may be
reflected in brokerages balance sheets.
    Two sources said the investors who need to meet collateral
requirements had carried out the trades with the brokerages
Ahlatci, Alnus, Gedik, Tacirler and Trive.
    The margin call hit a record 1.8 billion lira ($98 million)
last week. It declined to 1.4 billion liras at the start of the
week and stood at 567 million lira on Thursday.
    Investors must meet margin calls by showing cash, shares or
other securities equal to the margin call to keep their
positions. Otherwise brokerages meet them by selling the shares.
    If these sales are insufficient brokerages must use their
own funds or if these are insufficient, the clearance
institution Takasbank's guarantee fund is used.
    Takasbank said this week risk parameters used in transaction
collateral calculations for banks' underlying assets in the
derivatives market had been amended.  urn:newsml:reuters.com:*:nL8N30R3HM
    The size of the Takasbank guarantee fund - at 1.2 billion
lira - is expected to be enough to cover potential losses but
losses may be reflected in brokerages' balance sheets.
    Gedik Investment said, "We cannot comment on the volatility
in markets. Our confidence in the capital markets of our country
continues today as it was yesterday."
    Alnus Investment did not respond to questions. A source
close to the company said there is sufficient collateral, some
of which are shares. Ahlatci, Trive and Tacirler Investment did
not respond.
($1 = 18.3992 liras)
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Turkey's banking index and margin calls    https://tmsnrt.rs/3rkkKG1
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 (Reporting Ebru Tuncay and Can Sezer;
Writing by Daren Butler; Editing by Andrea Ricci)
 ((daren.butler@tr.com; +90-212-350 7053; Reuters Messaging:
daren.butler.thomsonreuters.com@reuters.net))