Derivatives in Turkey: A Land of Opportunity?

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1 December 2013


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 asnot 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.