Istanbul Stock Exchange (ISE) has launched new sub-markets and a series of new arrangements for the ISE Bonds and Bills Market and the ISE Foreign Securities Market.
Within the framework of these new arrangements; a new repo market called ‘Repo Market for Specified Securities’ has been opened, in addition to the Repo/Reverse Repo Market that has been in operation for 17 years.
In addition to government debt securities, ISE-listed private sector borrowing instruments are subject to repo transactions on the Repo Market for Specified Securities. On the Market, repo transactions will be based on the specific securities agreed upon by the buying and selling parties, while such securities will not be blocked following the trade and therefore, will be available for use of the buying party during the maturity term of the repo.
According to ISE, at maturity, the buying party will deliver the corresponding amount of the securities subject to trade to the ISE Settlement and Custody Bank (Takasbank), to be transferred to the selling party.
The risk management system that has so far been used in the ISE Bonds and Bills Market sub-markets based on fixed rate collateralization is converted into a dynamic risk management system based on daily evaluation.
This new structure allows trading at lower cost for same value date transactions which are subject to a lower risk of price change, and therefore require less collateral, while permitting dynamic risk monitoring through daily evaluations for future date transactions which carry a higher risk of price change. Consequently, different amounts of collateral will be required for securities that are subject to different price change risks, according to ISE.
Within this framework, the amount of collateral for same value date transactions is decreased from its former level of 5% to 2.5%.