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to derivative instruments other than leveraged transactions shall be car-
ried out in exchanges, institutionalized market places, or over the
counter depending on the type of the transaction contemplated to be
engaged in. Article 26 of the Communiqué, on the other hand, sets out
that (i) the physical sale and purchase of the exchange, precious met-
als, precious stones, goods and other assets; and (ii) the derivative
transactions effected between real and/or legal persons without the
intermediation of an investment company that cannot be deemed as the
commercial or professional activity, are not deemed as derivative
instruments. Within such legal framework, it can clearly be set out that
there is no obligation to use intermediary institutions imposed upon the
parties engaging in any kind of derivative transaction, provided that
such transaction (i) is not executed in an exchange platform (i.e. Borsa
Istanbul); (ii) is engaged in by the parties in their own name and behalf;
(iii) cannot be deemed as a commercial or professional activity of the
parties (e.g. parties aim to hedge their own risks). In cases where such
exemption does not apply, the parties have to use an authorized invest-
ment institution as the intermediary, although no specific reporting
requirement arising solely from such transaction is imposed upon the
parties.
Intermediary Institutions as Dealers
Until the issuance of the Communiqué, the intermediary institu-
tions were not allowed to act as the counterparty to the derivative trans-
actions, with the main concern that such prohibition would also pre-
vent the counterparty risk that may have to be assumed by the inter-
mediary institutions. The new Communiqué, on the other hand, allows
for the intermediary institutions to engage in such transactions by
defining a new activity as “intermediation for portfolio.” In this
respect, Article 21 of the Communiqué defines “intermediation for
portfolio” as the activity that allows intermediary institutions to effect
the orders of purchase and sale in relation to capital market instruments
as the counterparty to such transactions. As such, the intermediary
institutions granted with the specific authority “portfolio intermedia-
tion” can act as dealers under the new Communiqué.
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NEWSLETTER 2015