Borsa Istanbul seeks Nasdaq investment

The head of the Istanbul exchange says he wants Nasdaq OMX to take an equity stake in his bourse of between 5 and 20 per cent as the two exchanges seek to deepen an alliance they hope will extend their presence throughout Southeast Europe, the Middle East and Africa.

Ibrahim Turhan, chairman and chief executive of Borsa Istanbul spoke to the Financial Times ahead of a formal announcement of the US exchange's investment. It is expected by December 11, when Robert Greifeld, Nasdaq chief executive, is due to visit Turkey.

The Turkish exchange is also working on an agreement with Euroclear, the central securities depository, to make trades easier for international investors. This follows Turkey's upgrade to investment grade status since November last year by Fitch Ratings and Moody's Investors Service, a development that facilitated the purchase of the country's securities by institutional investors.

"Having the investment grade is like opening the gate," Mr Turhan said in an interview. "It does not necessarily insure that people will go through the gate; in order to facilitate that you need to take some additional, complementary measures and that is what we are actually doing."

He said that at present, his exchange could only execute 5,000-6,000 orders a second, which he described as "very low", but that as part of the technology link up with Nasdaq it would seek to increase this to up to 200,000 orders a second.

Describing Nasdaq's prospective equity stake in Borsa Istanbul as a sign of the two groups' commitment to each other he said, "if it takes place, I would prefer it to be no less than 5 per cent and no more than 20 per cent.

"This is a link that will tie us together," he added, "Not only for the lifespan of this technology transfer project: this will open the door to move together throughout the region: in southeastern Europe, Central Asia, West Asia, even in Africa."

Among the goals of such a partnership would be to persuade groups from the broader region to list in Istanbul and to link up with other exchanges in the area.

Mr Turhan said that meanwhile a deal with Euroclear would help expand Borsa Istanbul's pool of international investors by giving them direct access through the securities depository. Borsa Istanbul would also look for similar arrangements with other global custodians.

He sought to downplay the impact of the prospect of US Federal Reserve tapering on the Turkish economy, although the country has a current account deficit of around 7 per cent of gross domestic product, more than 80 per cent of which is financed by portfolio funds.

"I am afraid this may never happen," he said of tapering, comparing monetary stimulus to a morphine injection for developed economies: "Whenever you start talking about diminishing it, the patient starts crying." He argued that in the event of tapering investors would distinguish more between markets and would continue to favour Turkey "even at a little bit higher financing cost" because of its macroeconomic fundamentals.

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