With one of the fastest growing economies in Europe and a process underway to consolidate its capital markets under a single entity, the Borsa Istanbul (BIST) appears to be on the verge of truly taking off. Moreover, BIST and the NASDAQ OMX Group signed a strategic partnership agreement on December 31, 2013, thus signaling the U.S. company’s faith in the Turkish stock exchange’s position and potential. Dr. Ibrahim Turhan, Chairman and CEO of BIST, speaks about recent developments.
The CEO of NASDAQ OMX Group, Robert Greifeld, recently said that Turkey’s strategy to consolidate the various markets under BIST will enable the market to become a “very strong regional player.” Please tell us more about this move.
The capital markets law changed and strategic partnerships have taken a huge step forward. The reaction is between the economy of Turkey, which is now ready for such an explosion, and the capital markets, which have been waiting for such a move for years and years. Now we will have cash equity markets and related derivatives. We’ve already introduced single stock options. The same goes for indexed options and futures.
As for our partnership with NASDAQ, it is not just about the transfer of technology; it is also related to know-how, which will enable Borsa Istanbul’s team to have a deep knowledge of technology and full control of the system. We will also be ready to get integrated with major financial centers around the world. There will be more mutual bilateral projects between BIST and other advanced, developed financial centers.
In October, the Borsa Istanbul premises were chosen by the World Bank for their new and unique Global Islamic Finance Development Centre. Where do you see opportunities for Borsa and Islamic-based equity in Turkey?
Infrastructure projects fit very well with Sharia-compliant instruments because at the end of the day, it is a sale and leaseback kind of project, and if you have an income-generating real estate asset, then you can easily sell it to investors because there is continuous cash flow and the instrument is based on the asset.
When it comes to Turkey, as you know, there are a lot of ongoing infrastructure projects, be it roads, bridges, energy power plants etc. They are very much linked and appropriate projects for sukuk insurance.
Do you see Istanbul’s aspirations to be the regional financial hub taking shape?
In order to put your money and wealth in a financial center, you need a safe and predictable place. Behind this, you need a well-diversified, strong economic base. The main difference between Istanbul and other places in the region is the strength of the economy. It is well diversified and not dependent on just one or a few economies. It enjoys a strong investor base, and deep, liquid domestic markets. There is rule of law, and a legal framework in line with international standards.
In my view, there are two very important developments – first of all, the establishment of an international arbitration court in Istanbul, which will operate in accordance with ICC principles, and also the introduction of specialized courts in financial transactions and special courts for capital markets.