Spotlight

New legislation that went into effect Monday (January 2nd) changes the way the Istanbul Stock Exchange (IMKB) is administered. While proponents say the move will speed up the bourse's privatisation, it has also spurred anxiety among some in the private sector.

Adopted by decree in November, the changes "mark a step towards its incorporation, through which all other bourses worldwide have already passed," Aydin Haskebabci, vice-chairman of Turkey's Capital Markets told SES Türkiye.

Red flags have gone up among private sector representatives, however, over the new distribution of posts on the IMKB board of directors.

Previously, the board chairperson was proposed by the Capital Markets Board (SPK) and appointed after approval of the related minister, the prime minister and the president. The remaining four members were elected by private intermediary firms.

Under the new law, the number of board members will increase from five to seven. The chairman and three other members will now be appointed by the government, with the remaining three elected by private sector representatives.

"This situation is not at all pleasant for the private sector. On the contrary, the private sector is worried about these changes," said Mehmet Osmanoglu, general director of Piramit Securities and one of the three members that will represent the private sector on the IMKB board.

The new regulations governing the IMKB's administration came "overnight" and as a sudden surprise, Osmanoglu said. The government did not consult with sector representatives or any other party, and the amendments are badly written and vague, he added.

He also said the amendments conflict with existing legislation, according to which the IMKB board is elected by the bourse's general assembly.

Another crucial amendment is the change of the quorum rules for the IMKB board of directors meeting to four, from five members. That means the board could meet even without the presence of private sector representatives.

Attila Koksal, chairman of Turkey's Capital Markets Intermediary Firms Union (TSPAKB) told SES Türkiye that despite the concerns, the overall effect of the legislation is likely to be positive.

"At first sight, one might think these changes will significantly reduce the voice of the private sector in the IMKB administration and that the latter is in a sense being nationalised. However, we believe this re-structuring is made for good purposes," he said.

Köksal said the bourse had never been administratively autonomous in the past, as decisions taken in the general assembly were always bound to approval by the SPK. "Thus, I do not think there will be substantial changes from the administrative point of view."

Many stock exchanges in other countries were incorporated in the 1990s and Turkey is already late in this respect, according to Koksal. Moreover, he said, Deputy Prime Minister Ali Babacan told private sector representatives in a recent meeting that the key reason for the amendments is to speed up IMKB's incorporation, within the framework of the Istanbul Financial Centre project.

In Osmanoglu's view, however, there is no reason for the IMKB to first be "nationalized" and then incorporated. "There is no such example in the world," he said.

"We are faced with a paradoxical situation: On one hand, the government is rushing to privatize all public economic enterprises arguing they would be more efficient in the private sector's hands. On the other hand it is trying to take the private sector's hands off the IMKB," he added.

If the IMKB is not incorporated or if this takes too long, there will hardly be any positive results with the new administration, according to Halil Dogru, an Istanbul-based lawyer specializing in capital markets.

"It can't be said the the current [administration] is good. But the solution should not be to [first] transform the bourse into a public institution, but rather in re-structuring it in a way that market dynamism can also be reflected," he told SES Türkiye.