Founded two and a half years ago by the Turkish Chambers of Commerce, the ISE, the Izmir Mercantile Exchange and the banks Is Bank, Garanti Bank, Ak Bank, Yapi Kredi Bank and Vakif Bank, Turkdex offers 10 derivatives contracts of which two - on the Istanbul 30 Index and the US dollar - can be described as active and functioning.

Currently the lack of shares available to borrow makes it difficult for many investors in Turkey to go short, but this should be addressed by the introduction of single stock future in the coming year.

Despite its youth and the relative paucity of instruments available, it has 80 members and seen sky-rocketing growth with trading volume growing sixfold every year to 2007 and a fourfold increase predicted for 2008, resulting in an expected trading volume of $400bn (€270m). Daily turnover increases monthly, but in December 2007 was at $700m. The largest individual share of business does not exceed 10% and international investors account for about 50% of the trading volume.

Risk management during periods of high inflation involved simply substituting Turkish lira for US dollars. The appreciating lira means that companies want to increase the lira exposure on their balance sheets. However, volatility continues to be a concern as do sharp currency movements. Derivatives are for many the perfect solution for this new environment. Or rather they would be if only investors and corporates had the requisite competence to use them effectively.

The expertise to use derivatives effectively is currently lacking, which is holding back the futures market from following most markets in becoming much larger than the spot market - it is currently half the size of the ISE. But this expertise is slowly being built up, while grey areas in the current regulations that have impeded the involvement of institutional investors are likewise being addressed.

With both these processes already underway, general manager Hamdi Bagci is confident that domestic institutional investors will make up 50% of the trading volume in “not more than two years”.

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