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Istanbul Stock Exchange (ISE) has announced the launch of new sub-markets and a series of new arrangements for the ISE Bonds and Bills Market and the ISE Foreign Securities Market, effective from today.
Within the framework of these new arrangements;
A new repo market called “Repo Market for Specified Securities” opens today, in addition to the Repo/Reverse Repo Market that has been in operation for seventeen years.
In addition to government debt securities, ISE-listed private sector borrowing instruments are subject to repo transactions on the Repo Market for Specified Securities. On the Market, repo transactions will be based on the specific securities agreed upon by the buying and selling parties, while such securities will not be blocked following the trade and therefore, will be available for use of the buying party during the maturity term of the repo. At maturity, the buying party will deliver the corresponding amount of the securities subject to trade to the ISE Settlement and Custody Bank (Takasbank), to be transferred to the selling party.
Radical changes are going into force in the ISE Bonds and Bills Market risk management system today. The risk management system that has so far been used in the ISE Bonds and Bills Market sub-markets based on fixed rate collateralization is converted into a dynamic risk management system based on daily evaluation. This new structure allows trading at lower cost for same value date transactions which are subject to a lower risk of price change, and therefore require less collateral, while permitting dynamic risk monitoring through daily evaluations for future date transactions which carry a higher risk of price change. Consequently, different amounts of collateral will be required for securities that are subject to different price change risks.
Within this framework, the amount of collateral for same value date transactions is decreased from its former level of 5 per cent to 2.5 per cent. On the other hand, the trades realized on the Market are evaluated on a daily basis, and with regard to the differences in the value, either the relevant Member’s collateral is blocked or a margin call is made. Furthermore, due to the difference of the risk involved, the amount of collateral for private sector borrowing instruments will be equal to twice of that of the government debt securities.
Also, starting from December 17, 2010;
Debt securities with coupons, whose coupon payment is due on V2 date can be used in repo transactions as well.
The tick size, formerly equal to 5 basis points in the Repo/Reverse Repo Market is reduced to 1 basis point.
The value date for private sector borrowing instruments is extended to 30 days from its former level of 7 days.
The lapse period for cross trades is reduced from 30 seconds to 10 seconds.
The above arrangements are aimed at operating the ISE Bonds and Bills Market more efficiently and at lower costs, while allowing the trading of ISE-listed private sector borrowing instruments on the new “Repo Market for Specified Securities”. Furthermore, the ISE encourages trading of these securities in an organized market by accepting them as collaterals for the Bonds and Bills Market transactions, subject to certain conditions.
Eurobond Negotiated (Neg) Deals Platform Launches
A Eurobond Neg Deals Platform launches today in the ISE Foreign Securities Market in addition to the existing outright purchases and sales market
In the new Eurobond Neg Deals Platform, members will send price and quantity quotations to the market via Advertising Orders Screen, without being required to realize trades; enter their orders by choosing the counterparty of the trade using the Neg Deals Screen, and negotiate deals via order screens.
As a result of the amendments on the ISE Eurobonds Markets settlement and custody principles, the settlement period is changed to T+1, and the settlement of the trades realized on the ISE will be done by Euroclear Bank through the ISE Settlement and Custody Bank (Takasbank). Members may also carry out the settlement of Eurobond trades realized on the ISE, along with the settlement of Over the Counter (OTC) trades by Euroclear Bank through the ISE Settlement and Custody Bank (Takasbank).
With the Eurobond Neg Deals Platform and the new settlement arrangements, Istanbul Stock Exchange aims to allow the ISE Eurobond Market to operate in integration with the international markets in line with the needs of the market participants.
