On September 19, 2018, the Turkish Capital Markets Board (“CMB”) published the Communiqué on Principles of Reporting to Trade Repositories (IV-87.1) (the “Communiqué”) relating to the procedures and principles on reporting requirements.

Background

The Communiqué is part of the CMB’s efforts to align its legislation with the legal framework of the European Union. Following the financial crisis of 2008, to ensure stability of the financial structure and strengthen infrastructure, G-20 countries adopted certain regulations such as the Dodd Frank Act of the United States and the European Market Infrastructure Regulation (EMIR) of the European Union. In its ongoing efforts to align its legislation with the EU legal framework the CMB first announced its intention to introduce reporting requirements on derivative transactions on August 27, 2018, and appointed the Central Registry Agency as a trade repository institution for such purposes. On September 19, 2018, the CMB issued the Communiqué to set forth the details relating to the responsible parties and the deadlines for the reporting obligations regarding the derivative contracts.

Under the Communiqué, parties to over-the-counter and on exchange derivative transactions and central counterparties to trade repositories are required to report certain details on such derivative transactions to trade repository institutions.

Who must report?

1. The investment firms (intermediary institutions, other capital markets institutions regulated by the CMB to provide investment services or to engage in investment activities and banks), are required to report derivative contracts executed:

(i)    amongst themselves for their own portfolios,

(ii)   with their clients,

(iii)  with counterparties located in Turkey or abroad on their client’s behalf,

(iv)  over-the-counter in Turkey or on foreign exchanges or over-the-counter abroad, for their own portfolio (except for circumstances provided under (i)).

2. If a derivative contract is executed by an investment firm (acting as an investment firm authorized to execute orders on behalf of clients) on their client’s behalf with another investment firm located in Turkey, then the investment firm which is authorized to act as a portfolio management company is liable to report.
3. If the settlement and clearance is conducted through a Turkish central counterparty, then such central counterparty is under the obligation to report.
4. The legal persons residing in Turkey (other than investment firms) are under the obligation to report the derivative contracts executed for the purposes of trading among themselves, or with foreign parties in foreign exchanges or over-the-counter without the involvement of an intermediary institution (authorized by the CMB).
5. There is no reporting requirement applicable to derivative contracts executed either amongst real persons or between real persons and legal persons.
6. It is also possible to assign such reporting obligations to the counterparties or to a third party trade repository member contractually, however such assignment will not release the obligation of the responsible party.

Deadlines for Reporting

• For new derivative contracts: All exchange traded or over-the-counter derivative contracts executed on or after November 30, 2018 should be reported to trade repositories “on the business day” following their execution, amendment, early termination or termination of the relevant derivatives contract. Prior to January 1, 2019, the reporting requirement may be fulfilled within “two business days”, instead of “on the business day”.
• For existing derivative contracts: For the derivative contracts which are (i) outstanding on November 30, 2018 regardless of their execution date, or (ii) executed after January 1, 2018 and are either settled or terminated as of November 30, 2018, the deadline to report is set as January 1, 2019.
• For new derivative contracts of legal persons residing in Turkey: The reporting obligation for derivative contracts mentioned under item (4) above, the reporting obligation will start on January 1, 2019 (instead of November 30, 2018).
• For existing derivative contracts of legal persons residing in Turkey: For the derivative contracts which are (i) outstanding on January 1, 2019 regardless of their execution date, or (ii) executed after January 1, 2018 and are either settled or terminated as of January 1, 2019, the deadline to report is set as January 31, 2019.

The Central Registry Agency published several general letters (the latest on December 3, 2018) providing instructions relating to the scope, format and other requirements relating to reporting. Please feel free to contact our team should you need any further information.

This information is provided for your convenience and does not constitute legal advice. It is prepared for the general information of our clients and other interested persons. This should not be acted upon in any specific situation without appropriate legal advice. This information is protected by copyright and may not be reproduced or translated without the prior written permission of Ergün Avukatlık Bürosu.