Recommendation 1 Recommendation 2 Recommendation 3 Recommendation 4

Recommendation 5 Recommendation 6 Recommendation 7 Recommendation 8

Market selection

Recommendation 5

The major risks in Securities Systems should be mitigated by five key measures:

• the implementation of real delivery versus payment
• the adoption of a trade date plus one settlement cycle in a form that does not increase operational risk.
• the minimisation of funding and liquidity constraints by enabling stock lending and borrowing, broad based cross collateralisation, the use of repos and netting as appropriate
• the enforcement of scrip-less settlement
• the establishment of mandatory trade matching and settlement performance measures.

1.	Does the market use DvP settlement procedures in accordance with one of the recognised BIS models? If so, which one? If the model is not BIS model 1, are there plans to move to this model?	Yes. For the organized market settlement the BIS Model 3 is applied by Takasbank, with final transfers of both securities and funds occurring throughout the settlement cycle. For the OTC settlement, BIS Model 1 is applied by Takasbank and the Central Bank of Turkey.
2.	Does the market have a rolling settlement cycle of T+3 or shorter for all exchange traded instruments?	Yes. Rolling settlement on T+2 for equities, T+0 for bonds and bills.
3.	Could the market reduce the current settlement period to T+2 or below, without increasing fails rates? If so, how would this be achieved, and what plans are there to shorten the existing settlement cycle?	For equities technically the settlement cycle can be shortened to below T+2. However, with the current systematic of the international capital markets practice, fail rates will increase due to foreign investors related trade settlement.
4.	Is matching of trade details achieved on trade date, at least for direct market participants; and by trade date plus one for indirect participants?	After the organized market trade, there is no electronic matching of trade details for settlement purposes, as multilateral netting is applied. For the ISE Equities Market, trade information is transmitted by the ISE to Takasbank online at the end of the trading day. Takasbank systems clears these trades via multilateral netting and specifies legally binding obligations and receivables of the members. Direct and indirect participants receive the related information online from Takasbank proprietary system on T+1. It is planned to provide this information on T+0. For the ISE Bonds and Bills Market, above procedure is applied on T+0. As for the OTC settlement at Takasbank, matching trade details for settlement purposes is available by the trade date for all participants.
5.	Is the depository scrip-less, and, if not, is it working to enable scrip-less settlement?	Securities are required to be in physical form in Turkey. Takasbank is the central securities depository and the sole authority to safekeep physical equities. Equities are immobilized at Takasbank. Settlement related transfers are realized fully in book-entry form. Government debt instruments are practically dematerialised at the Central Bank of Turkey. Dematerialization process has got a start by the amendment in the Capital Markets Law in the end of 1999. This law oversees the establishment of a Central Registry Institution and the dematerialization of all securities. Related regulation is under development by the Capital Markets Board in co-operation with ISE, Takasbank and the market participants.
6.	Does the market allow partial settlements?	Yes. Settlement is based on delivery versus payment (DvP). For this purpose, receivables of the participants are pledged against their obligations. Thus, participants do not get their receivables unless they fulfill their obligations. In case of partial fulfillment of the obligation, proportional payment/transfer out of the receivable is made to the member.
7.	Can the depository accommodate same day turnarounds?	Yes. Same day funds is one of the basic settlement principles of Takasbank. As the whole market can reach the EFT system of the Central Bank of Turkey (Takasbank and other banks directly; brokerage houses through TETS), same day turnarounds can be transferred out of Takasbank system, efficiently.

Bank of International Settlements (BIS) Settlement Models

Model 1:	Systems that settle transfer instructions for both securities and funds on a trade-by-trade (gross) basis, with final (unconditional) transfer of securities from the seller to the buyer (delivery) occurring at the same time as final transfer of funds from the buyer to the seller (payment).
Model 2:	Systems that settle securities transfer instructions on a gross basis, with final transfer of securities from the seller to the buyer (delivery) occurring throughout the processing cycle, but settle funds transfer on a net basis, with final transfer of funds from the buyer to the seller (payment) occurring at the end of the processing cycle.
Model 3:	Systems that settle transfer instructions for both securities and funds on a net basis, with final transfers of both securities and funds occurring at the end of the processing cycle.