Turkish Derivatives Market: A Success Story

2 December 2010

Çetin Ali Dönmez, CEO

Turkey Derivatives Market Event,

London

Story

Contents

1. A Brief History

2. An Overview of Turkish Derivatives Exchange

3. TurkDEX Products3. TurkDEX Products

4. Investor Profile

5. Trading Data

6. What is Next?

1. A Brief History1. A Brief History

Timeline

Record trading volume: TRY 3 billion 129 million.

CFTC

No-Action Letter

TurkDEX has

98 members

The legislation on “The Establishment and Operation of Futures and Options Exchanges” was published in the Official Gazette.

The opening bell rang with 34 members.

Trading volume exceeded TRY 1 billion.

The value of open interest exceeded

TRY 1 billion.

million.

2. An Overview of Turkish Derivatives Exchange 2. An Overview of Turkish Derivatives Exchange

The Only Derivatives Exchange in Turkey

TurkDEX Inc. is the only derivatives exchange authorized

by the Capital Markets Board to operate in Turkey

A Single Market Place forTrading Futures and Options in Turkey

www.aboutturkdex.org

Check out:

Turkdex Corporate Structure

� TurkDEX is a for-profit company dedicated to expanding the trading volume and

the range of products.

� The shareholders of TurkDEX include financial and non-financial institutions of

Turkey.

TThehe Union of ChambersUnion of Chambers and and

Commodity Exchanges of Turkey %25Commodity Exchanges of Turkey %25

Istanbul Stock ExchangeIstanbul Stock Exchange %18%18

Izmir Mercantile ExchangeIzmir Mercantile Exchange %17%17

Yapı Kredi Bank %6Yapı Kredi Bank %6

AkbankAkbank %6%6

VakVakiif Securities Incf Securities Inc %6%6

Garanti BankGaranti Bank %6%6

IsIs Securities Securities IIncnc %6%6

Turkish Association of Securities DealersTurkish Association of Securities Dealers %6%6

TakasbankTakasbank %3%3

T T SSiinai Kalknai Kalkiinma Banknma Bank %1%1

Trading System

�Fully electronic exchange with remote access.

�Trading system with high performance capability

�Fully integrated order entry, execution, clearing and settlement�Fully integrated order entry, execution, clearing and settlement

�Safe trading environment:

Account-based upfront margining

Margining at TurkDEX

� Margining is done on account basis at TurkDEX

� Margin levels are dynamically adjusted according to

market conditions

Risk Management

The Guarantee Fund at TurkDEX

� The guarantee fund is established by contribution

of the clearing members

� It is used in case a member defaults

� The risk of any default is shared by all the members

TurkDEX Members

As of September 30, 2010, TurkDEX has 98 members:

Clearing members

Non-clearing members

All current

members are

clearing members.Non-clearing members clearing members.

� Clearing Members can trade both for

� their own account

� their clients’ account

Trading Hours

08:45 09:15 17:25-17:35 17:45

Clearing Period

T+1 Day

14:30

Normal Session

Non-Trading Period Closing

Period

Announcement of Settlement

Prices and Issuing of Margin

Calls

There is a single session at TurkDEX with no lunch break.

3. TurkDEX Products 3. TurkDEX Products

A Summary of Product Range

FINANCIALSFINANCIALS

Equity Index FuturesEquity Index FuturesISE-30

ISE-100

Interest Rate FuturesInterest Rate Futures

COMMODITIESCOMMODITIES

Gold Futures

Wheat Futures

Cotton Futures

Interest Rate FuturesInterest Rate FuturesT-Benchmark Government Bond

Currency FuturesCurrency FuturesUSD/Turkish Lira

EURO/Turkish Lira

Physically delivered currency futures

The Most Liquid Financial

Instrument in Turkey

The ISE-30 equity index futures is the most liquid financial

instrument within the overall financial system in Turkey.

The contract size is around $5,500

Daily trading volume is around 200.000.Daily trading volume is around 200.000.

Daily trading value exceeds $ 1 billion.

Investors can trade

�in large numbers with ease

�without any short selling constraints

�with small bid-ask spreads (tick size is TRY 2.5)

Contract Specifications:

ISE-30 Futures

Underlying Asset ISE National 30 Index

Contract Size Value calculated by dividing the index value by 1,000 and multiplying thequotient by TRY100.

(ISE National 30 Index/1,000)*TRY 100 (Ex. 70.825*100=TRY 7,082.5)

Price Quotation ISE National 30 Index value, divided by 1,000 shall be quoted significant tothree decimals.

Minimum Price Fluctuation (Price Tick)

0.025 (25 ISE National-30 Index points)

Value of one tick corresponds to TRY 2.5

Contract Months February, April, June, August, October and December (Contracts with three Contract Months February, April, June, August, October and December (Contracts with three different expiration months nearest to the current month are traded. If December is not one of those three months, an extra contract with an expiration month of December shall be launched.)

Daily Price Limit ±15% of the established base price for each contract with a different contract month

Initial Margin TRY 900

Last Trading Day Last business day of each contract month

Settlement Method Cash settlement

Position Limit 20,000 or 10% of open interest

Contract Specifications:

Currency Futures

Underlying Asset TRY/USDollar or TRY/Euro Parity

Contract Size $1,000 or €1,000

Price Quotation Turkish Lira per USD with four digits. Sample quote=TRY 1.5855

Turkish Lira per Euro with four digits. Sample quote=TRY 1.9410

Minimum Price Fluctuation (Price Tick)

0.0005 (Value of one tick corresponds to TRY 0.5)

Contract Months February, April, June, August, October and December.(Contracts with three different expiration months nearest to the current month are three different expiration months nearest to the current month are traded. If December is not one of those three nmonths, an extra contract with an expiration month of December shall be launched).

Daily Price Limit ±% 10 of the established base price for each contract with a different contract month

Initial Margin TRY 140 for TRY/USDollar parity and TRY 180 for TRY/Euro parity

Maintenance Margin 75% of the initial margin

Last Trading Day Last business day of each contract month

Settlement Method Cash settlement

Position Limit 20,000, 10% of open interest

Commodity Futures at TurkDEX

� With the start of market-making in gold futures in 2009, we have

seen an increase in trading volume.

� There is currently no physical delivery in commodity futures due

to lack of licensed warehousing. to lack of licensed warehousing.

� We hope to see increased volumes of trading in cotton futures

and wheat futures once licensed warehouses are established.

4. Investor Profile4. Investor Profile

Investor Profile in Open Interest

of ISE-30 Index Futures

26,39%

Individual

Investor Profile in Open Interest Value of ISE-30 Index Futures

(28 October 2010)

Note: The total number of accounts held as of October 28, 2010 was 65.762.

73,61%

Institutional

Investor Profile in Open Interest

of ISE-30 Index Futures

41,56%

Domestic

Investor Profile in Open Interest of ISE-30 Index Futures

(28 October 2010)

58,44%

Foreign

Investor Profile in Open Interest

of Currency Futures

Institutional

42,36%

Investor Breakdown in Open Interest Value of Currency

Futures (28 October 2010)

Individual

57,64%

42,36%

Investor Profile in Open Interest

of Currency Futures

Foreign

1,66%

Investor Profile in Open Interest Value of Currency Futures

(28 October 2010)

Domestic

98,34%

Investor Profile in Trading Value

of ISE-30 Index Futures

Institutional

23,21%

Investor Profile in Trading Value of ISE-30 Index Futures

(Jan-Oct 2010)

Individual

76,79%

Investor Profile in Trading Value

of ISE-30 Index Futures

Foreign

10,77%

Investor Profile in Trading Value of ISE-30 Index Futures

(Jan-Oct 2010)

Domestic

89,23%

Investor Profile in Trading Value of

Currency Futures

Institutional

37,74%

Investor Profile in Trading Value of Currency Futures

(Jan-Oct 2010)

Individual

62,26%

37,74%

Investor Profile in Trading Value

of Currency Futures

Foreign

1,05%

Investor Profile in Trading Value of Currency Futures

(Jan-Oct 2010)

Domestic

98,95%

5. Trading Data5. Trading Data

A Tremendous Growth at Turkdex

162,361

217,297

235,124

Yearly Total Trading Volume 2010 (in millions of USD)

Note: The year 2010 data includes the first 10 months of 2010.

2005 2006 2007 2008 2009 2010

2,24212,251

92,924

Breakdown of Open Interest Value

TurkDEX ISE-30

92%

Breakdown of Underlying Assets in Open Interest Value (TRY)

26.10.2010

TurkDEX TRY/Dollar

7%

Others 1%

Daily Average Trading Value

1076

1376

939

1107

905

1200

921

1.038

1.386

1.235

1.009

1.113

964

1.468

Daily Average Trading Volume (in millions of USD)

2009 2010

Our daily average trading volume in October 2010 recorded the highest level of 1.468 million USD.

574530 519

811776

738

939905 921

January February March April May June July August September October

TurkDEX-ISE Trading Value

65%66%

72% 72%68%

65%

62%

77%

89%

77%

71% 66%

83%

70%69%

77% 82%

104%

84%

100%

72%

80%

100%

120%

Ratio of TurkDEX-ISE Trading Value (%)

TurkDEX trading value constituted 104% of total trading value at Istanbul StockExchange in June 2010 .

2% 2% 3%6% 8%

7%

12%

11%

16%

23%

19%

36%

29%

40%

29%

36%

46%

65%

58%

59%

66%

54%

62%

55%

68%

60%

62%71% 66%

54%

58%

70%69%

59%

44%

63%

57%57%60%

0%

20%

40%

60%

Top Derivatives Exchanges

Source: Futures Industry Association (FIA)

Equity Index Futures Ranking

Source: Futures Industry Association (FIA)

6. What is Next?6. What is Next?

New Products

TurkDEX is dedicated to expanding the trading volume and the

range of its products.

New Products to be listed soon include:

December 2010December 2010

�TurkDEX-ISE 30-100 Index Spread Futures

�Euro/Dollar Exchange Rate Futures

�Dollar/Ounce Gold Futures

2011/Q1

�Options�Currency Options

�Equity Index Options

New Projects

A New Trading System

�The exchange has started working on a new trading platform with more functionality.

Cooperation with Local Commodity Exchanges to Improve Liquidity

�Turkdex is actively involved in licenced warehouse establishment initiatives

Market-Making

�Market making in gold futures contracts started in 2009.

�Market making in other contracts such as currency futures will follow.

Physical Delivery

�The physically settled TurkDEX-TRYUSD and TurkDEX-TRYEuro currency futures were launched on 7 December 2009.

Attributes of the New System

�More functional trading platform

�Pre-trade and post-trade risk management

�Trading Account and Depository Account�Trading Account and Depository Account

�Portfolio based margining

�FIX API

�Give-up functionality

Thank you for your kind attention…

For further details:For further details:

www.turkdex.org.tr

www.aboutturkdex.org