1. Clearing House Operations
TAKASBANK
Derivatives Market
Clearing House Operations
London, December, 2004
Good Afternoon
Ladies and Gentlemen,
Esteemed participants of the financial sector;
Thanking OECD for providing this platform; I will YTL to share our views, thoughts and experiences with you.
My presentation consists of two main parts:
In the first part, I will YTL to summarize our understanding of the global trends which have an affect on the securities services indusYTL; and I will share with you the results of our comperative-analysis of the recent international recommendations of IOSCO, ISSA and G30’s, “for a most promising” clearing and settlement system.
In the second part of my presentation, I will present you information on clearing, settlement and custody in Turkey and particular information on Takasbank.

2. GENERAL INFORMATION ON TAKASBANK
Securities are in physical and bearer form
Custody accounts are on fungible basis. (Non-fungible safekeeping is also available upon request.)
Corporate action services: dividend payments, exercising pre-emptive rights, bonus shares, interest payments and redemptions, proxy voting.
Customer Name Based Custody system requires the identification of investors via their sub-accounts under the intermediary institutions.
Takasbank assigns a unique “Takasbank registration number” to each investor.
Takasbank provides an Interactive Voice Response system (Alo-Takas) and an internet service (TakasNet), through which the investors are able to reach real-time information on their accounts and, block their equities entirely or partially within working hours.

3. Unique Functions of Takasbank in Turkey
Clearing and Settlement Institution for the Istanbul Stock Exchange (ISE)
Central Securities Depository of Turkey
Money Market for ISE Members
Official Custodian for Pension and Mutual Funds
National Numbering Agency of Turkey
Clearing House for the TURKDEX
Securities are in physical and bearer form
Custody accounts are on fungible basis. (Non-fungible safekeeping is also available upon request.)
Corporate action services: dividend payments, exercising pre-emptive rights, bonus shares, interest payments and redemptions, proxy voting.
Customer Name Based Custody system requires the identification of investors via their sub-accounts under the intermediary institutions.
Takasbank assigns a unique “Takasbank registration number” to each investor.
Takasbank provides an Interactive Voice Response system (Alo-Takas) and an internet service (TakasNet), through which the investors are able to reach real-time information on their accounts and, block their equities entirely or partially within working hours.

4. Bridge Role in The Turkish Financial Markets
Capital Markets
Board
Capital Markets Intermediaries
Istanbul Stock Exchange
TURKDEX
Issuers
Investors
indirect
Central Registry
Institution
TAKASBANK
On the upper level the capital markets institutions are depicted.
In the middle part you see the issuers and our indirect relation with investors.
On the bottom level banking sector is demonstrated.
Takasbank in in relation with all these parties, facilitates a bridge role among various players of the financial sector and between money and capital markets.
After the introduction of the dematerialization, Central RegisYTL Institution will also take its place within this picture.
Banking Regulation and
Supervision Board
Central Bank of Turkey
Banks

5. Shareholder Structure
The total value of paid-in capital is USD 41.3 million

6. Operational Efficiency
Off-site Disaster Recovery System with an operations center; with real time backup facility.
All operational program products are developed in house
All members are online connected to Takasbank system and using our proprietary program products.
The Takasbank Electronic Transfer System (TETS) enables brokerage houses to transfer both securities (G-Bonds &T-Bills) and cash in and out of the Takasbank system electronically in real-time connection with the Central Bank's EFT / ESTS systems.
Real-time connection to Turkdex, Istanbul Stock Exchange, Central Bank of Turkey and Capital Markets Board.

7. Custody System with Numbers
Equities
Bonds & Bills
Pension and Mutual
Funds Portfolios
Asset Value under Custody ( )
USD (Billion.)
25.7
20.7
17.1
Total number of investor
sub-accounts (equities) with balance
1,111,356

8. Organized Market Clearing and Settlement with Numbers (Equities)
Number of Members : 113
Number of Companies Traded: 295
Average Daily Trading Volume: 579 ml$
Average Daily # of Contracts : 202,000
G-Bonds&Bills Market Clearing and Settlement
Number of Members : 140
Average Daily Trading Volume:
OP&SM: 980 ml$ Repo M: ml$

9. DERIVATIVES MARKET CLEARING HOUSE
Securities are in physical and bearer form
Custody accounts are on fungible basis. (Non-fungible safekeeping is also available upon request.)
Corporate action services: dividend payments, exercising pre-emptive rights, bonus shares, interest payments and redemptions, proxy voting.
Customer Name Based Custody system requires the identification of investors via their sub-accounts under the intermediary institutions.
Takasbank assigns a unique “Takasbank registration number” to each investor.
Takasbank provides an Interactive Voice Response system (Alo-Takas) and an internet service (TakasNet), through which the investors are able to reach real-time information on their accounts and, block their equities entirely or partially within working hours.

10. Takasbank’s functions
Clearing member selection with Turkdex,
Central counterparty to derivative contracts,
Determining the collateral type and procedures,
Collateral valuation daily,
Mark to market daily margining on sub account basis,
Monitoring collateral composition and margin call,
Managing of collaterals in case of default,
Guarantee fund management,
Cash collaterals management,
Member training.

11. General Clearing Principles
Margin deposit requirement before buying or selling of a derivative contract.
Futures contracts are marked-to-market daily and final settlement on T+0.
Contracts are settled on cash basis.
Margin calls are paid in cash (TRL).
Clearing system and collateral management system are totally customer based.
On line real time connection (Trading System Messages Router) with TURKDEX.
Takasbank guarantee is limited only with the following sources;
Margin collateral
Guarantee fund

12. Membership types General Clearing Member (GCM):
GCM is authorized to trade and clear its own portfolio and clients’ trades
GCM may addititonally provide clearing services to the non clearing members, who are also authorized to trade in Turkdex.
Direct Clearing Member (DCM):
DCM is only authorized to trade and clear its own portfolio and clients’ trades.
DCM can not provide clearing services to non clearing members.

13. Membership requirements
Capital adequacy,
Sufficient financial resources,
Certified as a derivatives intermediary by the Capital Markets Board,
Approval of Turkdex Board of Directors as a market member,
Sign Clearing Membership Contract,
Fullfillment of clearing member obligations such as contribution to the Guarantee Fund.

14. Account types
Portfolio
Market maker
Client
Global (omnibus)

15. Collateral types
Initial margin
Maintenance margin
Extra-ordinary margin
Guarantee fund collaterals

16. Eligible collateral margin
TRL
Foreign currency (USD, EUR)
FX Indexed Bonds
G-Bonds & T-Bills
Equities (ISE 100)
Mutual fund certificates

17. Composition of collaterals

18. Collateral Deposit/Withdrawal Operations
Collateral deposit/withdrawal takes place in the electronical environment.
Collaterals deposit to relevant a/c by the clearing members.
Depositing is made sub a/c basis.
Account owners can get available balances through members.
Available collaterals are calculated as follows:
Available Collateral = Deposited - Required +/- Profit
Collateral margin (Loss)

19. Collateral Valuation
Collateral valuations is done by Takasbank at the and of day process with the following price data:
for Bonds valuations, by ISE calculated prices which is used in Repo collateralization,
for Equities valuations, by ISE market closing price,
for FX valuations, by Central Bank FX price,
for Mutual Fund valuations, by unit price.

20. Daily Mark to Market
Daily losses are cut from the cash collateral while profits added to the cash collateral on the same day.
Because the loss is cut from the cash balance, if the collateral is below the Maintenance Margin, margin call announcement is made by Takasbank.
Daily profits can be withdraw after the session, as long as the collateral composition is satisfied.

21. TURKDEX DERIVATIVES MARKET TRADING
Session hours: 10 am- 3 pm
TURKDEX 2
Buying
member
Buy Order
Sell Order
Selling
member
Trading Engine 3
RISK CONTROL
COLLATERAL 4
Cash+Non cash =
Total collateral H
Tot.Col > Req. margin
Order
canc. E
Order
match 1
Collateral
Position
TAKASBANK
Col. deposit
Col. deposit
Col. Deposit or withdraw request are collected and transmitted to Turkdex

22. TURKDEX DERIVATIVES MARKET CLEARING
TAKASBANK
MEMBER DM
14:45 Turkdex DM is updated with the latest collateral balance. 15:15 Turkdex announce the settlement price
and calculates the margin call amount.
15:15 Takasbank receives the Req. Margin and Profit/Loss amounts and starts the daily mark to market operations. Losses cut from the cash collaterals. Margin call announcement to members.
15:30 Last hour for the cash management order for daily cash withdrawals.
16:30 Last hour for margin call. Daily profits are
added to the cash collaterals.
16:30 Cash management, money transfer and placement is exercised.
17:00 Last hour for omnibus position details.
18:00 + End of day operations (valuation, reporting, accounting, cash management, a/c transfers etc.)
MBS SCREEN
(WAN)
-Deposit-withdr.
-Omnibus a/c
-Default
-Gurantee fund
-Cash management
-Reports (MIS)
-a/c opening

23. Guarantee Fund
Guarantee Fund is established by the Clearing House with the clearing members’ contribution. This fund makes payment in case of the defaults.In any default, the defaulting member’s contribution is used first and if necessary then non defaulting members’ contributions are used on a pro rata basis.
Clearing members must contribute this fund with cash and non cash collaterals. Fixed amount of the contibution is determined by the membership type, while variable amount is calculated with open positions and volume of the member.

24. Eligible Collateral Types for Guarantee Fund
TRL
Foreign currency (USD, EUR)
FX Indexed Bonds
G-Bonds & T-Bills
Mutual fund certificates
Letter of Guarantee

25. Cash Management
Cash margins and Cash Guarantee Fund contributions are subject to cash management.
Contract based margin colleteral is subject to cash management and net interest income is added to cash collateral following business day.

26. THANK YOU
TAKASBANK