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pared to exchange transactions in respect of liquidity and risk, they
also provide much more flexibility due to lack of requirement, such as
membership, collateral and centralized exchange. In this respect, it
should further be noted that as per Article 36 of the new Communiqué
on Principles Regarding Investment Services and Activities and
Ancillary Services numbered (III-37.1) issued on 11 July 2013, which
came into effect on 1 July 2014 (“Communiqué”) of the Capital
Markets Board (“CMB”), CMB is authorized to determine the deriva-
tive instruments that are to be transacted in an exchange, and the spe-
cific rules and principles regarding the execution of such transactions
pursuant to the proposal of the centralized execution institute, and also
based on the limits to be set for these transactions, and within the
framework of the principle of reducing the systemic risk. The CMB
can also require that the over the counter transactions of investment
institutions are executed in an institution that is to be authorized as the
centralized counter party.
Requirement for Intermediation under New Communiqué
The CML defines the capital market instruments as securities,
derivatives, and other capital market instruments (including investment
agreements) that are to be determined as such by the Capital Markets
Board (“CMB”). Further, as per Article 37 of the CML (i) receipt and
transfer of orders in relation to capital markets instruments; (ii) execu-
tion of orders of capital market instruments in the name and on behalf
of the client, or in its own name and on behalf of the client; (iii) sale
and purchase of capital market instruments on behalf of itself are
deemed as investment services. As such, since these activities are
deemed as investment services, they can solely be carried out by autho-
rized investment companies under the CML in accordance with the
Article 39 of the CML. In this respect, as the derivatives are also
deemed as capital market instruments, the intermediation of an invest-
ment company will be required regardless of whether the transaction is
executed in an exchange or over the counter.
Exemption under the Communiqué
Article 25 of the Communiqué stipulates that the activities of
transfer of order, intermediation of transaction, or portfolio, in relation
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