TSPAKB THE ASSOCIATION OF CAPITAL MARKET INTERMEDIARY INSTITUTIONS OF TURKEY
LICENSING OF BROKERAGE FIRMS IN TURKEY
ACTIVITIES OF INTERMEDIARIES • The capital must be fully paid-in;
To provide investment services, all intermediary insti- • The brokerage firm/derivatives brokerage firm
tutions have to be authorized by the Capital Markets should meet the minimum capital requirements;
Board (CMB). While only brokerage firms and banks • Necessary collateral and guarantees must be allo-
authorized by the CMB may apply for membership cated. 15% of the minimum capital required by the
to the Istanbul Stock Exchange (ISE) or the Turkish licenses held should be pledged at Takasbank (Set-
Derivatives Exchange (TurkDex), derivatives broker- tlement and Custody Bank);
age firms may only become a member of TurkDex. • Service units must be established, adequate per-
Membership to the Association (TSPAKB) is compul- sonnel must be recruited, a satisfactory accounting,
sory for all intermediaries. record keeping, information, communication and
documentation system must be in place, techni-
With the decision of CMB, banks were required to cal hardware must be provided, an internal control
transfer their equity market operations to a broker- and audit system must be set up, job descriptions,
age firm as of January 1997. Since then, only broker- the authority and responsibilities of the personnel
age firms are allowed to trade equities. In the fixed must be determined, and cash, securities and other
income market, banks, as well as brokerage firms assets kept within the institution must be insured
are authorized to trade. In the derivatives market, against fire and theft (CMB makes on-site inspec-
brokerage firms, derivatives brokerage firms and tions to check the adequate fulfillment of these re-
banks are the market players. quirements);
• The brokerage firm/derivatives brokerage firm
CMB’s Communiqué Serial V, Number 46 is the main
should apply for membership to the TSPAKB (Asso-
regulation regarding the establishment and activities
ciation);
of brokerage firms. Derivative brokerage firms are
• The brokerage firm should participate in the In-
subject to similar set of regulations defined by the
vestors Protection Fund;
Communiqué Serial V, Number 90.
• Founders must have the necessary financial capac-
Intermediary institutions are required to obtain a li- ity and credibility;
cense from the CMB in order to be able to offer serv- • Managers must be university graduates, and all
ices. CMB determines minimum requirements for expert personnel must be at least high school gradu-
application and examines each application in detail ates;
before issuing a license. • The general manager and assistant general man-
The operating licenses can be summarized as fol-
lows:
1. Securities Trading (Banks are authorized only for
intermediation of off-exchange equity transactions),
2. Public Offering,
3. Portfolio Management,
4. Investment Consultancy,
5. Repo/Reverse Repo Agreements,
6. Margin Trading, Securities Lending & Short-Sell-
ing,
7. Derivatives Trading
LICENSING REQUIREMENTS
A brokerage firm/derivatives brokerage firm should
meet the following general conditions in order to
obtain a license from the Capital Markets Board.
• The brokerage firm/derivatives brokerage firm
should be established as a joint stock company;
• The brokerage firm/derivatives brokerage firm
should have 100% of its paid-in capital in registered
form;
LICENSING OF BROKERAGE FIRMS IN TURKEY
LICENSING OF BROKERAGE FIRMS IN TURKEY
agers must either have a Minimum Capital Requirements (2010)
minimum of 7 years of pro- Brokerage Firms TL US$
fessional experience in fi- Securities Trading 803,000 510,262
nancial markets or manage- Public Offering 403,000 256,084
ment, or hold an Advanced Repo/Reverse Repo Agreements 403,000 256,084
Level License (certification is Portfolio Management 322,000 204,613
required for managers, re- Investment Consultancy 84,000 53,377
Margin Trading, Securities Lending and Short-Selling - -
search and corporate finance
Derivatives Trading - -
analysts at intermediary
Total 2,015,000 1,280,422
firms, audit firms and asset Derivatives Brokerage Firms
management companies); Trading in Currency and Precious Metal Derivatives 767,000 487,386
• In case the board of di- Trading in Commodity Derivatives 767,000 487,386
rectors wants to appoint a Trading in All Kinds of Derivatives 1,533,000 974,137
board member as an ex- Source: CMB *Calculated as of June 2010
ecutive director, at least two There are three thresholds to be met at all times:
members should be appointed with clearly defined
responsibilites; • Minimum capital required by the licenses held,
• The members of the board must inform the board • Last three months’ operating expenses, and
of directors if they have been into a blood or marital • Risk-adjusted capital.
relation with the individuals party to the decisions of
Risk-adjusted capital is based on the risk weighting
the board of directors, such as vendors or clients.
of assets by the coefficients determined by the CMB.
Any ownership changes surpassing 10%, 20%, 33% Some items, such as real estate, are deducted from
or 50% of the brokerage firm’s capital is subject to the shareholders’ equity and the remaining portion
CMB approval. Also, CMB must be notified of chang- of the equity is expected to exceed the risk-weighted
es that do not affect these thresholds. assets.
MINIMUM CAPITAL REQUIREMENTS On the other hand, TL 767,000 (~US$ 487,000) min-
In addition to general conditions, there are minimum imum capital requirement should be met by deriva-
capital requirements to obtain licenses for brokerage tives brokerage firms which are engaged in trading
firms. Current amounts are presented in the table. of currency and precious metal derivatives. Again,
TL 767,000 (~US$ 487,000) minimum capital is re-
All brokerage firms must have at least the Securities quired for brokerage firms engaging in commodity
Trading license. Derivatives Trading license does not derivatives. In order to offer full derivatives services,
require additional capital. Technically, Margin Trad- the brokerage firm is required to have TL 1,533,000
ing, Securities Lending and Short-Selling license is (~US$ 974,000) of paid-in-capital.
not considered as a “license” but a “permit”, so it is
also not taken into account for the minimum capital RELEVANT REGULATIONS
requirements. Communiqué Serial: V, No: 46 on Principles Regarding Inter-
mediary Activities and Intermediary Institutions
In order to become a full service brokerage firm, at
Communiqué Serial: V, No: 90 on Principles Regarding Condi-
least TL 2 million (~US$ 1.28 million as of end June tions for Establishment and Activities of Derivatives Brokerage
2010) paid-in capital is required for the year 2010. Firms
CMB Communiqué Serial V, Number 34 defines Communiqué Serial: V, No: 34 Regarding the Principles on Capi-
capital adequacy requirements for brokerage firms. tal Adequacy of Brokerage Firms
Edited by Ekin Fıkırkoca, Written by Alparslan Budak & Efsun Ayça Değertekin August 2010
For online version please visit TSPAKB’s website at; www.tspakb.org.tr. research@tspakb.org.tr
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is obtained from reliable sources, is up-to-date and accurate. However, TSPAKB can not guarantee the accuracy, adequacy or integrity of the data or information.
Information, comments and recommendations should not be construed as investment advice. TSPAKB does not accept any responsibility for any losses or damages that
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