Derivatives Market

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BRIEF HISTORY

The Derivatives Market Department is established on the 3^rd of May 1994 in order to provide portfolio management and risk transfer opportunities to market participants, particularly to corporate, large scale investors and portfolio managers. The new market is expected to increase liquidity and depth of spot markets.

The initial objective was to launch the index futures contracts as the first product, however with the adoption of the free-floating currency regime in February 2001, the exchange rates have become very volatile and as a result the establishment of the currency futures market was accelerated. On August 15^th, 2001, the first futures contract on TL/USD rate was launched with the maturity date of September 27, 2001.

The derivatives market is regulated mainly by the following two regulations:

· The Istanbul Stock Exchange Futures and Options Market Operations and Membership Regulation

· The Regulation Regarding the Operations and the Membership of the Istanbul Stock Exchange Futures and Market Clearing Center

The above mentioned regulations were prepared on the basis of the provisions stated in paragraph j of the 1st item of Article 22^. of Capital Market Law dated July 28, 1981, No. 2499 amended by the Law dated December 15, 1999 No. 4487 and published on the Official Gazette of Turkey numbered 24467 on July 19^th2001.

TRAINING

Derivatives brokers receive training programs from selected faculty members of various universities and from market specialists since 1995. The brokers first attend a theoretical course and take a comprehensive exam. Those who are successful in the theoretical part become eligible to proceed with the screen-training program. Until now, over 500 derivatives brokers have successfully completed the theoretical training and over 200 of them have successfully completed the screen-training program.

TRADING SYSTEM

After the detailed analysis and onsite visits, electronic trading platform has been decided to be the best solution for the market and the development of the necessary software began in 1997 in cooperation with a foreign software company.

The trading system matches orders according to price and time priority. Orders are either entered into the system via the terminals on the stock exchange floor or can be given to the derivatives market staff by telephone. Orders must be entered with an account number for the system to check for sufficient collateral.

Immediately after the trade, collateral and position information of accounts are updated. Moreover, as prices change, the system calculates profits/losses of accounts within certain time intervals and allows all trades to be monitored on-line. The system also produces various daily and historical reports.

Trader workplaces in the Derivatives Market are NT (Windows) based and can be customized by the user. Trader workplaces have different types of user categories. Each of the categories is assigned a different level of authority and for each user category all inquiry screens are updated real time. Various types of orders including; limit, market, keep remainder and stop loss orders are supported by the trading system.

Through an online link between the ISE and the Takasbank - Takas ve Saklama Bankası A.Ş (The ISE Settlement and Custody Bank) the system directly get updated all the information on the total amount of collaterals deposited and withdrawn.

CONTRACT SPECIFICATIONS

Contract definition	:	TL/USD, TL EURO

Contract size	:	10,000 USD, 10,000 EURO

Price increments	:	1000 TL.
		Thus, each price increment has a value of 100 million TL. (1000*100,000 = 100 million TL)

Daily price limits	:	± 20%.
		The base price used in the calculation of price movements is the settlement price of the last session. The upper price limit is rounded to the next price increment and the lower price limit is rounded to the previous price increment

Initial margin	:	1.75 billion TL for TL/USD contracts, 2.0 billion TL for TL/EURO contracts (approximately 12 % of the contract value)
		In addition to cash TL, TL denominated bonds, foreign currencies and foreign currency denominated bonds are also accepted as collaterals. At least 30% of the initial margin must be in cash TL. Calendar spreads are margined at 1 billion TL for both types of contracts.

Maintenance margin	:	80% of the initial margin.

Last trading day	:	The last third business day of the month.
		The day after the last day of a futures contract a new futures contract begins

Contract months	:	Nearest month and the nearest month of the March cycle.

Settlement day	:	Trades are cash settled at T+0.

Settlement process	:	Takasbank handles all settlements
		Margin calls should be met by 16:30, otherwise the relevant account and the firm will be in default.

Trading hours	:	One continuous auction session between 10:00-14:00 with a one hour lunch break between 12:00-13:00.

Maximum order quantity	:	100.

Market commission	:	0.005% of contract value for both buyer and seller.

GUIDELINES FOR INVESTORS

Market and clearing members are currently limited to commercial banks. The banks are selected according to their ranking in currency transactions, currency exposures and their sizes. The list of our members and their relevant licenses for different markets can be found on our web-site under the subtitle MEMBERS. As the number of traded instruments increase and as the market develops, the number of members are also expected to increase.

Customers willing to trade in the Derivatives Market are required to first sign a risk acceptance note stating that they have read and understood the “Risk Guide” that explains the characteristics of the market instruments. Therefore it is strongly recommended that investors read the afore mentioned "Risk Guide" carefully. It should be noted that our members may require higher margins from their customers according to the risk and credibility.

ISE DERIVATIVES MARKET