Iris Cibre *
As the whole country is talking about, the biggest manipulation in the history of the country, especially in the Equity futures markets, took place in Borsa Istanbul, in exactly 2 months.
I am attaching 2 related articles below so that you can see the beginning and development of the subject.
Too many have suffered greatly; First of all, the manipulators themselves due to their greed, then the brokerage houses, regulators and, as always, investors. But Borsa İstanbul suffered the most. Reliability, the awareness that it should improve its investment ability, the hope that the stock market will spread to the base, has all been destroyed in exactly 2 months.
It is true that the regulator and the economy management, who watched the collapse, had a big share.
I thought of camels eating desert thorns. As they eat thorns, their mouths bleed, the more they think that the taste of warm blood is the taste of the thorn, the more greedily they eat, and if they can’t control themselves, this camel dies of blood loss thanks to this good taste. It is called harese, so in Turkish it is passion…
Our economy is going very well. The rise of the stock market over banks was proof of its improvement, for politics. So the more they ate the thorny grass, the better it tasted, the more passionate they were, ignoring what had happened. With this passion, our Stock Exchange bled, briefly…
We all learned what happened, wrote and drew the development, but what about the result?
October 3 will be the place where the zurna says “zırt”. The deadline for futures contracts is September 30.
In the evening, the market will be closed, prices will be negotiated, and those who have long positions on the next business day, if they do not close the position, will be physically delivered to their accounts.
Now, as it is known, this manipulator group has a large amount of shares in the shares of İş Real Estate Investment Trust, T. Sınai Development Bank and Şekerbank. Since September 15, these stocks have been going down (down 10 percent every day). Therefore, they can neither sell their shares in the spot nor their contracts in the Futures market. The institutions had agreed among themselves and promised not to send heavy sales to the base, but when one of them, which was on everyone’s lips, broke this agreement, we started to see sellers reaching 180 million lots on the boards.
In the emergency meeting held at TSPB and CMB on Monday, a cash settlement was requested for futures contracts, but this request was rejected. The reasons were simple; They could not explain the cash settlement exception to the citizens and would put the Arbitrage Funds in a difficult position. How can arbitrage funds be in a difficult situation, I hear you say.
First of all, what do these funds do? They arbitrage on the name. They try to make a profit by catching the differences between the two markets. In our example, high interest margins were achieved due to the faster outflows in bank futures stocks compared to spot stocks in the 2-month period. Naturally, arbitrage funds made use of this high interest rate between the two parties by selling in VIOP and buying spot shares. If the cash settlement is realized, on Friday these funds will receive the profit from the Futures share, but will remain in their portfolio of shares on the spot side. The clarification that would normally take place will not occur. Funds that have taken positions in the aforementioned stocks will not be able to sell these shares as long as there is a base, and a loss will be written for these shares. We are talking about estimation at the moment, we do not know which funds have these shares left, I think that some of the funds we wrote are completely theoretical but logically in their hands.
Therefore, I do not expect an exceptional cash settlement situation.
What would happen in this type of situation with a smaller coat?
On October 3, these shares would be transferred to the accounts of those who had a long position in these shares in the Futures.
Sample; 100 lots of Guarantee shares against 1 contract…
Garanti Bank’s term collateral is 205 TL. The brokerage house also demands double the collateral; You have 1 contract guarantee contract with 410 TL and you did not sell it. On October 3, 100 LOT of Garanti Bank will be credited to your account. Suppose the share price at that time was $19. The amount that should be in your account is 1900 TL, but you have 410 TL. In other words, you need to find another 1490 TL and deposit it into your account or sell the share. But what is that? Wooden base, no buyers… You can’t find the money either. The institution calls you to complete your equity, and you say that I don’t have any money. In this case, the institution has to complete that equity on your behalf and will try to get that money from you legally. The swap, on the other hand, will return the money received and send it to the account that has entered physical delivery and made a profit with an open position in Viop. With that money, that account was going to buy the shares of Garanti Bank, which he was exposed to.
But in our current situation, the mount is too big. There is a manipulator in huge loss who will not be able to pay the cash creditor and he has positions in many institutions. It is difficult for institutions to pay the entire amount of this debt to the cash creditor, so I don’t think either BIST or Takasbank would want to create a systematic risk.
What we mean by systematic risk is the inability of the clearing system to make this clearing.
So I think this issue will try to be resolved within this week.
The solution content may also be:
- Large buyers (manipulators) and sellers can be brought together and their positions can be closed and netted with special orders.
- If there is a portion that cannot be clarified, the cash of that portion is covered by institutions such as BIST, Takasbank, MKK.
- Then strict rules are brought to Viop.
- Levers are lowered
- If you want to trade institutions on Viop, your collateral is no longer 500 thousand TL, but 5 million TL, the minors are removed from the market.
- Intraday observations are increased
- These monies paid by the public are collected from intermediary institutions over time.
- Intermediary institution distributions are clearly displayed to the investor during the day.
- Most importantly, when a risk is seen, necessary measures are taken early and CMB gives more importance to timely intervention.
And the system continues to operate in a re-established cautious manner.
In short, on October 5th, we will either see some institutions default or deposit money into the swap as the boards continue to bottom out, or the swap clogged. That is, until the boards are solved and there is an opportunity to sell. The positive scenario is that the base of the boards is unraveled until that day…
At the moment, we do not know the cost of this situation to any institution. However, if the deal is not realized, October 3, that is, the physical delivery day will be the day the zurna says zırt…
*Financial Markets Specialist