Turkey working on revision of market manipulation regulations – sources

Turkey’s BDDK banking watchdog is working on a revision of last year’s market manipulation regulations to increase their clarity after criticism from the banking sector on the grounds that they were vague and open-ended, five sources told Reuters.  The regulation has been used to intimidate business reporters and economic commentators who tried to blow the whistle on the former economy czar Albayrak’s abuses of power, as well as criticize government policies.

 

The revision, which the sources said aimed to comply with European Union standards, is the latest in a series of market-friendly steps taken by authorities since an overhaul of top economy policy makers in November.

 

In May, under then-finance minister Berat Albayrak, Turkey adopted regulations to punish institutions spreading false or misleading information in financial markets. Critics complained it was unclear what constituted an offence under the rules.

 

“Work is being conducted on last year’s BDDK regulations identifying manipulation, misleading transactions and practices in financial markets,” one economy official told Reuters.

 

“What is on the agenda is changing measures which have created tension and caused problems in implementation,” the official said, adding that the BDDK was working on it in cooperation with other institutions and the banking sector.

 

The BDDK declined to comment on the issue.

 

The 11-article regulation gives sweeping definitions of what would be deemed manipulation and market speculation and there have been concerns in the market that regular foreign exchange transactions could be affected.

The regulations, for example, deemed as manipulation transactions that can potentially result in “false or deceptive” impressions regarding the issuance, demand or price of a financial instrument.

 

Albayrak abruptly resigned in November, soon after President Tayyip Erdogan replaced the central bank governor. Sources said Erdogan took that step after briefings on the economy’s fragility as the lira slumped and forex reserves dwindled.

 

The central bank has since raised interest rates sharply and taken other steps which have boosted the lira, while Erdogan has pledged economic reforms to revitalize an economy hit by the coronavirus pandemic.

 

Sources said planned revisions to the market manipulation regulations, which would take the form of new bylaws rather than a completely new law, would be aimed at clarifying vague elements of the legislation.

 

A senior banking source told Reuters that the regulations had several elements which strayed from EU mandates and which were open to interpretation.

 

“A regulation is being prepared to make the open-ended bits more concrete. It will be a regulation to bring this regulation in line with the EU and not leave it open-ended,” the source said.

 

ANALYSIS

 

With BDDK still stuffed with Albayrak’s appointees and supporters, the new regulation needs to be scrutinized thoroughly to see whether it offers true relief to those who discharge their fiducial or journalistic duties of speaking the truth.

 

One very  damaging side effect of the manipulation regulation has been to silence the Researchers in most global investment banks, who feared losing business from Turkey.  At one point, Turkish markets were roiled by rumors that BRSA demanded all London traders doing Turkey business voluntarily disclose their conversations with counterparties to the agency.  More than 100 economists and journalists are believed to be on trial for breaking the violations since its introduction.

 

Even if the new regulations expunge the effort to criminalize legitimate research and news, the behavior of Capital Markets Board, which can also initiate criminal probes in matters of misinformation and prosecutors ought to be watched. These zealous entities have most often than not sided with BDDK, dragging impartial economists and journalists to courts.

 

This is a small step by Turkey to right the wrongs of the Albayrak era, which have caused unmeasurable damage to the markets, economy and Turkey’s reputation abroad.

 

 

Comments by Atilla Yesilada

 

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Published By: Atilla Yeşilada

GlobalSource Partners’ Turkey Country Analyst Atilla Yesilada is the country’s leading political analyst and commentator. He is known throughout the finance and political science world for his thorough and outspoken coverage of Turkey’s political and financial developments. In addition to his extensive writing schedule, he is often called upon to provide his political expertise on major radio and television channels. Based in Istanbul, Atilla is co-founder of the information platform Istanbul Analytics and is one of GlobalSource’s local partners in Turkey. In addition to his consulting work and speaking engagements throughout the US, Europe and the Middle East, he writes regular columns for Turkey’s leading financial websites VATAN and www.paraanaliz.com and has contributed to the financial daily Referans and the liberal daily Radikal.