Gümrük Birliği sürecinin Türk sermaye piyasasına etkileri
The Effects of Customer Union course on Turkish capital market
- Tez No: 87056
- Danışmanlar: PROF. DR. İLHAN ULUDAĞ
- Tez Türü: Yüksek Lisans
- Konular: Ekonomi, İşletme, Economics, Business Administration
- Anahtar Kelimeler: Belirtilmemiş.
- Yıl: 1997
- Dil: Türkçe
- Üniversite: Marmara Üniversitesi
- Enstitü: Bankacılık ve Sigortacılık Enstitüsü
- Ana Bilim Dalı: Sermaye Piyasası ve Borsa Ana Bilim Dalı
- Bilim Dalı: Belirtilmemiş.
- Sayfa Sayısı: 131
Özet
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Özet (Çeviri)
MARMARA UNIVERSITY BANKING AND INSURANCE INSTITUTION CAPITAL MARKETS AND STOCK EXCHANGE DEPARTMENT THE EFFECTS OF CUSTOMS UNION COURSE ON TURKISH CAPITAL MARKET MASTER THESIS (Appendix) by Önder HALİSDEMİR Supervisor : Prof. Dr. İlhan ULUDA? ISTANBUL -1997CONTENTS I. INTRODUCTION II. THE GLOBALIZATION OF THE FINANCIAL MARKETS AND EUROPEAN DIMENSION 1 Important Trends of European Stock Markets 2. The Features of Capital Markets of EC Countries 3. Regulations Related to Capital Markets in EC A. Quotation Activities B. Commerce of Insider Trading C. Investor Compensation Fund D. Institutional Investors in European Community 1. Collective Investment Companies 2. Social Security Institutions E. Stock Broker Organizations F. Supervising and Auditing G. Taxing 4 The Effects of EC Regulations on EC Capital Markets 5. The Risk Retained in European Financial Unification \. 1 « % * * ¦ «. -“ ?III. The Effects of Course of Customs Union with European Community on Turkish Capital Market. 1. The Effects of Unification in International Economical Theories 2. The Effect of Course of Customs Union on the Legal Regulations in Turkey A. Quotation and Commerce of the Insider Trading B. Regulations Related to Protection of the Investors C. Institutional Investors 1. Social Security Institutions and Private Insurances 2. Collective Investment Companies D. Stock Broker Organizations E. Supervising and Auditing F.Taxation 3. Turkish Capital Markets A. Transactions on Stock Shares B. Transactions on Securities and Bond Market C. Timed Transaction and Optional Markets D. Exchange and Preservation Activities E. Stock Broker Organizations I f ¦ >.< E \ ¦ -.¦-/# F.The Firms \ ff..”.'¦:'..'“.”'..;¦>'/ G. Investors '“>*# IV. CONCLUSION, EVALUATION AND RECOMMENDATIONSINTRODUCTION This study intended to evaluate the integration target of Turkish Capital Market with EC within the context of customs union course, which seems as only one of the socio-economic effects of our country's full membership to EC on customs union basis, but which is in strong mutual influencing with all the other effects. While harmonization and unification is being furnished in EC capital markets, Turkey commenced to harmonize its capital market and stock market together with its entire financial system in the full membership course to EC. This Master's Thesis titled as ”The Effects of Customs Union Course on Turkish Capital Markets“ is composed of six sections including the introduction. In the second section of the thesis, following the introduction, European Capital Markets and their characteristics, EC regulations on capital markets and their effects on EC capital markets and possible risks were discussed and it was attempted to draw a perspective for Turkish Capital Markets. In the third, fourth and fifth sections of the thesis, the estimated developments and possible amendments waiting for the Turkish Capital Market were put under the magnifying glass with the help of the predrawn perspective. In the conclusion section which forms the final part of the study, all the applications, developments, amendments and influencements reviewed in the foregoing sections were considered together with the inclinations of Turkish Capital Market, possible difficulties which may arise during harmonization course and estimated effects of unification. II. THE GLOBALIZATION OF THE FINANCIAL MARKETS AND EUROPEAN DIMENSION \ There are different globalization levels in the globalization course according to different instrument types. These instruments are stock shares, convertible securities and other instruments generating from such, private sector securities, public sector securities, money and foreign exchange markets. Foreign exchange and short termed capital markets with high liquidation's are the ones that have a strong connection with globalization.The globalization course occurred in the market of securities, especially in private sector securities where the price forms not only with market risk but also with loan risk, market liquidation risk and even preliminary payment risk in the primary market with the search of the issuers for a more advantageous interest rate. Although, the investors orienting the secondary security market do not have a significant effect on the international foreign private securities, these two markets that differ in a conventional way, are gradually becoming more dependent on each other. However, the stock shares market demonstrate a quite ambiguous development. Nevertheless, in stock shares market, there are not only the general risks of the market but also the performance risks related to the management of the companies and subsequently the risks that can affect the exchange rates in the stock market. In fact, in stock shares market, where the connections are weaker, the globalization took place at its lowest level. There are many factors that restrict the development of a global stock shares market. Two issues have greater importance from the point of view of the investors. On one hand, the management of a portfolio having an international feature and composed of stock shares is rather difficult, also the quality of the financial information provided by the companies vary in the countries that makes it harder for a suitable comparison between different countries. On the other hand, there is no international deduction and sharing system for stock shares. However, for the issuers, there is a problem of capital controlling as well as the difficulty in issuing stock shares in international markets (except the issuing of stock shares of a new category that will result divisioning in the market) having prices different from the national market. Despite such problems, there is also a globalization trend in the stock shares market. The purchase of American stock shares by foreign investors has reached hundreds of billion dollars. The worldwide globalization wave in the capital markets k^îepce^lthıe national financing markets to update themselves. The beneficiaries. jşsuiri^cörnpanies. institutional investors of these markets force their authorities ?td open* themselves for more competition. \ V ”.“ V'Although, the great national stock markets of Europe are within this development, ”Europe“ has delayed as a whole. Also, despite the existence of a relation between the momentary developments of the market and the power and authorizations of the public authorities arranging markets either in Paris or London on a ”national dimension,“ there is still no ”European dimension“ in financing issues as its is the case in many others. II. 1 Important Trends of European Stock Markets In the recent years, the stock and bonds markets were subjected to very important transformations in their organizations and regulations. The reforms and modernization efforts generally have the following basic targets: To increase the effectiveness of the stock and bonds markets, to provide a reliable, balanced and healthy operation in the whole financing system and to increase the measurements towards protecting the investors. The public authorities, shaping and controlling the stock and bonds market, made the following regulations in order to increase the effectiveness of the markets. a) They have rearranged the terms with regard to new entries to markets and stock market particularly the eligibility terms for Stock Market Membership as well as the terms that makes it possible for the foreign competitor Stock Brokers to be active in the market. b) The reducement or liberalization of the commissions: In certain countries, the economic efficiency of the transactions are increased through liberalizing fixed commissions or reducing such commissions and consequently the competition on the prices was encouraged (In England, 1986; France, 1988; Netherlands, 1990). c) Increasing the market efficiency via computer. In the recent years, the usage of computers began to widespread in the stock markets. The shift to computer using in t European stock markets started in 80' s and accelerated especiall} aftef the implementation of CAC (la cotation assisetee an continu) in Paris stock market and* SEAQ (Stock Exchange Automated) in London stock market after 1986 ^'d) The modernization of public stock and bonds market: In 80' s many countries spent significant efforts on the modernization of public stock and bonds markets. England, France, Spain and Italy are among these countries. e) To provide continuance of self formed market (third market): The modernization efforts for stock and bonds markets have directed to provide the continuance of the markets that are self operated beyond the official session hours in countries such as USA, England, Germany and Denmark. f) New financial instruments and development of the markets: It is necessary to mention two great trends in this issue. First one is the creation and improvement of new sections in the stock market for generally newly established medium scaled companies that can not meet the requirements for the acceptance of an official quotation. (In Italy, England, Netherlands, Denmark, France, Belgium, Germany). Second one is the development of termed financing instrument and optional promissory note markets. (In Germany, Denmark, France, Netherlands, England and some other countries) The stock and bonds regulations used by the public authorities in order to keep the financial system stabile and live and to reinforce the terms with regard to the protection of the investors are given below: a) The reinforcement of proprietary sources of the organizations active in stock and bonds market: In the recent years, particularly in England, France, Spain and Italy, regulations took place for the reinforcement of proprietary sources of the Stock Brokers in order to provide security in the market. b) Improvement of service quality: In order to provide a better protection for the investors, the public authorities have redetermined the eligibility terms and business rules related to Stock Brokers, and especially stock brokers and consultants. ^ c) The reinforcement of the powers of public trusteeship authorities: There fis a general trend of reinforcing the powers of public authorities arranging the capital markets.8 11.2. The Features of Capital Markets of EC Countries From the point of market values, the share of EC member countries reached 21% in the world markets capitalization. In capital markets globally while USA has 8 stock exchange and 7 derivative product markets, there are 46 stock exchange and 23 termed operation and/or option stock market in EC countries that are directed to form one stock exchange. London, Frankfurt, Paris, Amsterdam, Milan and Madrid stock markets are among the developed markets of EC countries. The difficulties in the integration of EC stock markets as in USA can be observed clearly both from the number of the countries and he number of the stock markets. At the same time, the national nature of the investors and Stock Brokers restrict the integration of EC stock markets. 11. 3. Regulations Related to Capital Markets in EC II.3.A. Quotation Activities EC accepted three directives related to quotation. These are Acceptance Directive, Quotation Specification Directive and Midterm Reports Directive. Acceptance Directive is related to the meeting of minimum requirements by the issuers prior to their quotation and then to continue their liabilities. The directive gives more restriction powers to quotation authority as well as the right of affecting additional terms. However, the severe terms to be effected should have a general nature, cover all the issuers and joint ventures and should be effective prior to the application for the acceptance of the stock and bonds for quotation. The directive covers the stock and bonds that were quoted in a member country or subject to quotation in the stock market. The contribution certificates issued by the collective investment companies and the stock and bonds supplied by a member country or its domestic institutions are excluded except the ones with closed ends. Generally three criteria are considered in stock market quotation acçtptM^çs/”\.- 1 a. Adequate legal and financial stability of the issuers '~ £ ;V 'A\ »“I b. Adequate depth of the stock and bonds quoted to stock market rie6es*s*aryrfor the stock market price ',.-?'c. Issuance of establishment condition and financial tables at least for the last three years before the application date. The second directive related to quotation is Quotation Specifications Directive arranging the contents, control and publishing of the declaration to be published upon the acceptance of stock and bonds to official stock market quotation. According to directive, the declaration should be published both at the time of supplying to public and at the quoatation of the stock and bonds to stock market. Should the declaration published only at the time of quotation of the stock and bonds to the market, the specifications of the stock shares which are not considered to quoted to the market yet but sold by means of supply to public, thus the investors willing to be informed about the issuing company would not be taken into account. The third directive related to quotation is Midterm Reports Directive. This directive determines the minimum standards of the information to be published by the issuer continuously. II.3.B. Commerce of Insider Trading The EC regulations on the Insider Trading depend on the council directive of ”Coordination in the Regulations of the Commerce of Insider Trading“ and ”European Council Convention on the Commerce of the Insider Trading'* The directive brings a definition on the commerce of the Insider Trading. According to this definition, the internal information is an information that is related to already issued or will be issued stock and bonds and not explained to public yet. The information that is not explained to public yet is expected to have a significant effect on the related stock and bonds market price. The Council directive groups the“internals”as primary and secondary. The primary ones are in a position where they can reach the internal, information by- means of their business, occupation or duty. : « - ;:: * However, the secondary ones learn the internal information from the prîînaryörıes: '¦' ' *“Ç. ¦'' ”“”' The directive forbids the transfer or recommendation of the internal information third parties. According to such, the primary internals are forbidden to10 a) announce the information they have obtained to third parties prior to public declaration b) to make recommendations or advise third parties with regard to purchase and sale of stock and bonds. The member countries are entitled to cover the secondary group in this prohibition. The directive let the penalty sanctions related to the commerce of the Insider Trading to the domestic legal regulations of the member countries. However,“mutualism principle”shall be applied for penalty sanctions. II. 3. C. Investor Compensation Fund The member countries are establishing a program for the compensation of the loss of the minor investors at a minimum level in case of failure of the investing companies in fulfilling their liabilities against their clients. The program is still at draft stage and has not been started to be applied. European Parliament and Council aimed basic harmonization in taking the deposits under guarantee for loan organizations with its Directive nr. 94/19/EC dated 30 May 1994. However, certain problems between the loan organizations and investing companies are still continuing. After all, it is considered to create a compensation program covering all the investing companies working under Sole European License in accordance with Investing Services Directive. According to the proposal the investors shall be protected in the following cases. a. The determination of the failure of an investing company by the authorities, in meeting the inventors' requirements due to financial conditions. b. A resolution of a judicial unit effecting the financial conditions of the investing company directly and postponing the requirements of the inveşj^fs ; »f^aifF&l, the...*-. _. company. ^ ^,^.v According to the proposal, the compensation amount may be determîiıe.djÇs a/c^yfa|n ratio of the investors' requirement. However, up to 20.000 ECU,' this.,jfâtîö^Q.an/'hot be below 90%...--) The country in which a branch of the investing company is located, may apply a program with higher protection compared to origin country.11 II.3.D. Institutional Investors in European Community II.3.D.1. Collective Investment Companies European Community determines certain directives for the collective investment companies as well as the legal frames of their establishment, operation and management as in other fields. The portfolios of the collective investment companies are administrated by a managing company that is an organization separate from the fund within the framework of both the laws and fund regulations. Apart from the managing company, there is a trustee responsible for the preservation of the stock and bonds in the fund portfolio, also for the selling, issuing, returning, amending and canceling the contribution certificates in accordance with fund regulation and laws and for determining the prices of contribution certificates. The trustee is responsible against the managing company for the losses due to his failure in fulfilling his liabilities. In order to prevent any clash of interest, it is forbidden for a company to act as a managing company and a trustee simultaneously. When the investment principles of the collective investment companies are reviewed, we see that the directive brings certain restriction on the type, issuing nature and portfolio shares of the stock and bonds that such companies may hold in their portfolios. The EC directive makes it mandatory for the collective investment organizations to publish declaration and six months' report.. The fund regulations shall be annexed to declaration. However, in case the places where the investors can take their shares are marked on the declaration or the fund regulations shall be sent to the'invps|o?fe!iipon their requests, there shall be no need to annex the fund regulation te*|he: dÇelaratiçkı. The directive organized the publishing princeiples with regard tö Inves'tmlnt partnerships and funds, declaration, annual report and six months report. Tfıe annual report should be published within the first four months following the end of the year, and the six months report should be published within the following two months.12 II.3.D.2. Social Security Institutions The Commission has prepared“Draft Directive for Retirement Funds”in 1984, within the framework of resolution on liberalization of the retirement system within EC body. The draft determines the overborder servicing, liberalization of the funds' investments in member countries and fund management conditions. In this directive,“prudent man rule”is taken as basis for activities of retirement funds. Furthermore, it brings an explanation on the rules for national stock and bonds portfolio limits increasing the portfolio performance of the funds. It is foreseen that the restrictions on the member countries will increase the demand for the national stock and bonds particularly the stock shares. In European Community, the retirement funds reached 900 billion ECU by 1992. It is around 995 billion ECU for 1995. The retirement funds offer liquidation increase and capital cost decrease in European capital markets as well as providing privatization financing. The portfolio limitations on the social security funds and fund rules in the body of EC, restrict the investments on the assets such as stock shares, real estate and foreign stock and bonds with high changeability. In EC, in managing the retirement funds, non-systematic risks are distributed through portfolio divergence according to modern financial investment theories and overborder investments are used actively in order to prevent systematic risks. The ratio of the retirement income provided by the public social security organizations, to the final income obtained prior to retirement, is a determining factor in the development of private retirement funds in a country. Among the EC countries, it is observed that where social security system provides high incomes the private retirement funds have less attraction. Furthermore, the taxes on, the private retirement funds has a significant effect on the funds level. Taking the. t'axeslfrom the retirement income instead of premiums or investment incomes results ihtthe increase of fund incomes. It is observed that in case of taxing the premiums and investment incomes in the source, the private retirement funds do no.t develop adequately due to a decrease in the fund accumulation contrasting the exempted tax application which is also called“expensing tax”.13 II.3.E. Stock Broker Organizations The EC regulations on this issue included in Capital Adequacy Directive aim to determine common rules for controlling the commencement capitals and retained risks of investing companies and loan organizations in the member countries. Particularly the provisions related to the harmonization of authorization and control systems are required for the controlling the commencement capitals and risks of the investing companies. The Directive's provisions related to organizations giving investment services are particularly keen on the harmonizing regulations related to the adequacy of financial sources of the Stock Broker organization, the specialization of the managers, and eligibility of the principal share holders as well as supervising. Such provisions include rules related to continuos supervision of the Stock Broker organization, its compliance with the administrative and accounting standards in their activities, appropriate recording of client accounts, organization's membership to investor compensation fund, its resistibility against financial adequacy and market risks, the smoothness on the record system of the operations etc. The directive determines portfolio management, undertaking of Stock Broker, investment consultancy, preservation services, operating power in name of itself, commissioning activities as well as the investing instruments such as investment fund contribution certificates, stocks and bonds, money market instruments, derivative ratios, foreign exchange rates and market tools dependent on interest. II. 3. F. Supervising and Auditing It is observed that there are different supervising and Auditing applications in EC member countries. Principally, there are two systems. First one is the“central system”which has a auditing powej^yi ;%e%jublic market and all contributors. i'-',«-,v '“' »s \ ?? -?:.? ?,:'J'^\ çi% :.- 1 /?{... -,, f - ”-'. - **>¦. ' 'A Increasing the competition efficiency of EC markets in the rapidİy?gJobalfzing*â|ock and bonds markets, depends on the elimination of negative progress d'ue.co;.6ü¥rent decreipt structure. The most important ones among these negative progresses are listed below:. The elevation of getting to stock shares markets. The increase in the capital expansion cots of the issuers15. Decrease it the net estimated return of the investors. Elimination of the regulations that are protecting the monopoly status of the national stock exchanges is considered as a solutionary approach to prevent the cartels in the local Stock Broker organizations. The nonexistence of severe differences between the member countries' stock exchanges from the point of operational procedures will assist in the efficient running of the electronic data and information system foreseen to be established between the European stock exchange markets and thus repeated procedures will be eliminated that will consequently make the usage of the sources more efficient. Investment Services Directive gives a right of selection to EC countries on the densification of a certain stock bond in a smooth market. Today, when the concentration on financial markets gains importance, the costs of seperation of Europe in order to prevent damage to competing power are varying. The densification fact, considered within the frame of Investment Services Directive may have a preventing effect on the creation of a sole capital market on Community basis, by reducing the competition. An important issue being discussed in EC is to have rules similar to USA Capital Market Council (SEC). As long as the integration increase between the European markets, overborder cooperation, coordination and information sharing between the organizations are inevitable in order to prevent the illegal activities such as the commerce of the insider trading, forgery and manipulation. The settlement of fragile and solemn issues such as purging black money is not visible yet in a central European Capital Market Council. Nevertheless, as long as European stock and bonds commerce is realized under effective competition conditions, the“.aeed ”for the establishment of a central organizing institution will decrease...-“' / *'”%.“ \ Among the member countries, only Ireland, Sweden and England! are'«cpmpl@'telv^i| compliance with Investment Services Directive and Capital Adequacy.2'Dir^tivpt Many of the member countries has realized sole European License application. In summary, the member countries are continuing their efforts on transferring the regulations on treatment regulation into their local applications.16 II. 5. The Risk Retained in European Financial Unification Three results of European financial unification can be foreseen: Expansion of markets, amendments in national regulations and densification of competition. As the mentioned course has already begun, there are current significant amendments. Also, sometimes such amendments reach at such levels that the current financial structures become upside down and different reactions occur in the markets. This detailed approach retains certain micro and macro risks which may open a discussion on the aimed targets. The mentioned risks may be grouped in three parts: risks resulting from misinterpreting competition, monetary instability and inadequate economic growth. In the first group of risks, the gradual unification of the markets and liberalization of capital movements will result in the expansion of competition at least in some fields. Should the harmonization of tax, product regulations and control of economic structures stay inadequate, competition may become more unstable. And such will cause system's loss of reliability in long term and create an inadequate balance leading a lower protection level for the consumer. When the risk of monetary unstability is reviewed, it is seen that the liberalization of capital movements together with the financial services increases the substitution degree of financial assets in European currencies and the volume of the portfolios that can be created with many foreign currencies. However, in a fixed but amendable foreign exchange system, such will cause a high rate of flexibility in the capital movements depending on the taxilion conditions, and foreign exchange rates. Therefore, complete liberalization of the.capital movements will retain the risk of an unstability of the interest rates between the- Cönimuhity countries highly beyond the differences between the inflation rates:. ”In the last group of risks, which we call as risks due to inadequate growth, we observe that the efforts towards the harmonization of economical policies that may conflict each other in order to provide a more efficient and stabile operation of markets do not include a more explicit economic growth.17 To have effective financial markets are not adequate in orienting the savings, also the economy should be attractive enough to encourage the organizations to make investments. On the other hand, it should be remembered that there is no possibility to increase the activities of the financial organizations at a significant level as long as high growth rates are not realized in real sector. III. The Effects of Course of Customs Union with European Community on Turkish Capital Market. III.l. The Effects of Unification in International Economical Theories The types of unification that are generally accepted in economical theory are listed below; 1. Free Commerce Zone 2. Customs Union 3. Common Market 4. Economical Union 5. Complete Economical Unification This classification defines the stages of a unification course more than separately valid economical unification (integration) methods. At each stage, the mutual economical and political dependency of the countries increase and the chances of following independent economic, monetary and financial policies decrease. The most important benefit expected from the international economical unions is the increase in the efficiency of the country's economy. The countries are able to maximize their savings and investments according to the scale of their countries and their influencement degrees through their efficient economies. The key factor in providing such efficiency and influencement is the liberalization performed at financial policies. In developing countries, liberalization in theij^fîİkrıeTai policies may only be achieved by means of a serial financial reformsiThese f^i^anciâl Jfeforms generally occur in two main subjects. ı.' ^ '5 \ %*. n'l - j*-f a. Giving complete freedom in the capital movements from abröaçt.'^ deme'stic and ''''“'?. C^I**»*1*”vice versa.18 b. Elimination of controls and restriction within the country which cause financial contraction. The international capital investments that became mobilized with the financial liberalization supports the economical development not only in the local economies but also in the foreign countries. The International capital movements form an important instrument of economical development and create a significant financial support for the economical growth of the developing countries. On the other hand, when the effects of capital movements on the capital markets are reviewed, it is observed that the access of foreign capital plays a role in reviving the capital markets of a country. The need for benefiting more from a global capital for economical growth arises structural reforms via instruments such as privatization in economy. The international portfolio investments gain importance gradually. This is mainly caused by the foreign investors' becoming marginal purchasers in world stock exchanges with an opportunity to control the prices. The prices of stock shares in the world markets rise as much as the international investors active in cash transfer. This situation retains the risk of an important decrease in the prices in case the foreign portfolio investors sell stock and bonds or withdraw themselves from the market. III. 2. The Effect of Course of Customs Union on the Legal Regulations in Turkey III. 2. A. Quotation and Commerce of the Insider Trading In Turkish regulations, the regulations related to quotation are included in Istanbul Stock Exchange Quotation Regulation. As it is the case for the othcrfegulation, the Quotation Regulation was prepared by taking EC quotation regulations as.basis ât a great scale. ;?.. ; '** 'S&lX. #s ? -/ The significant effect of public on Turkish capital market and thtf ^unsjpxfility v“ ill. ”*. '' ?-.?f-ijk.???' interest rates play a determinative role in banking system and whole econanay.,.“'' Another issue to be emphasized on the organized markets is that Turkey is the only country in Europe after Italy, which has an organized market for fixed incomed stock25 and bonds. Current Security and Bond Market within the body of IMKB is very similar to MTS market of Italy. However, though MTS has an autonomous vision and managed jointly by more than one organizations, in our country, Security and Bond Market is completely under the administration of Stock Market. III. l.C. Timed Process and Optional Markets In timed process and optional applications, from the point of Turkey's harmonization to EC, EC's lacking of a plan against the risks resulting from the derivative products and Turkey's lacking of a timed process market are playing important roles. Especially in Turkey, lacking of futures and optional markets, makes it impossible for the investors to make risk arrangements at the first stage according to a fixed term. The importance of indexed timed transactions and option contracts in risk arrangements of institutional investors managing portfolios as well as in loaned transactions is understood from widespread transactions in EC markets. Therefore, derivative contracts which will be formed as dependent on index or indexed fund playing a role in preparing the market for derivative contracts are necessary for market improvement. III. 4. Exchange and Preservation Activities The systems and applications used within the period starting from the selling and buying of stock and bonds to the exchange procedures varies between EC countries and it is aimed to harmonize such systems and applications within the framework of certain standards. The said differences are due to taxation on the access to record from certificate system, national payment methods and usage of various currencies. T+3 access studies run within the scope of ”World Exchange and Preservation --Activrfftel“*. b\ Thirties Group (G30) composed of developed countries are taken mto cöitsi'dera|ıİDn by EC. ' ': ; '%:'[} ' a- ? f Efficiency decrease in international investment and commerce due to the differences between the exchange periods brings out the need for accessing a common time application such as T+3. Therefore, in Turkey, access from T+2 to T+3 will be an issue of harmonization.26 IN the harmonization course of European stock markets, the complete elimination of the physical circulation of stock and bonds is considered as appropriate. Therefore, Stock Broker organizations are not allowed by SPK to hold stock and bonds. III.5. The Effects on the Contributors of Capital Market A. Stock Broker Organizations In Turkey, the Stock Broker organizations do not function in compliance with their true purpose which is commissioning income and servicing income, instead they are working in order to manage the portfolios of the investors more easily. This result may be obtained by only multiplying the process volumes with commission rates. The obtained figure will not be high enough to feed this much Stock Broker organizations. Due to the unassertivity of such organizations in competition and taking shares from service incomes, and EC regulations which do not require such organizations active in secondary market, to raise their current capitals, they will not be much affected during integration course. On the other side, the Stock Broker organizations which have an actual Stock Brokery nature will be subject to dense competition when the foreign Stock Broker firms are permitted to function, and they will have transfers, unifications, foreign partners on their agenda. III.5.B. The Firms In General, Turkish firms will have to allocate more sources for harmonization with EC, improvement of technological infrastructure, research & development, occupational training, quality, protection of environment, nature and consumer. On the other side, the fund supply of the many firms financing their investments with bank loans will face a great demand with the liberalization of the financial services, and consequently cheaper sources will be provide^s^Tjp^iJl help in decreasing the financing burden on such firms. The factors which jtiay lesjiict this are the country and firm risks.., > j u '%\ --? f1 1 Again, in EC, while the firms applying to public for demand shouldVhWe* a' capital of at least 1 million ECU, this figure is only 25 biilion TL (approx. 230:000 ECU) in Turkey. This is another issue which will be on the agenda during the harmonization27 course which must be brought into compliance with EC norms considering the interest of the investor. III.5.C. Investors The EC regulations on the protection of investors, which we have reviewed in the foregoing parts of this study, are completely in favor of the investor and have a nature rising the credibility of the capital market on the investors and helping investors in giving their investment resolutions in more trustiness. Particularly the sensitivity of EC on the commerce of insider trading will direct SPK and IMKB to be more careful an prudent in this issue, and prevent the capital market to be a toy of a few speculators. Thus, the investors will be able to give more rational investment resolution instead of depending largely on hints. IV. CONCLUSION, EVALUATION AND RECOMMENDATIONS In world economy, are the concepts of ”globalization“ and ”regionalization“ that emerged after the second half of 20 century, alternative to each other? To what degree do regionalization trends affect the liberalization and globalization movements in world economy? Will the generalization of regionalization eliminate globalization? Or, are regionalization and globalization in cooperation? Not only such questions and discussions are at the scene but also we observe that many countries in the world are in a movement such as integration to a Customs Union or Free Commerce Zone. Besides the already existing associations such as NAFTA; EFTA and European Community, many countries have taken their places or are getting ready for super commerce zones such as AFTA (American Free Commerce Zone that will cover 34 American countries until 2005), APEC (Asian-Pacific Economical Cooperation composed of 18 countries including USA, China and Japan; aiming free commerce until 2020). Despite the”merchandise pass but people don't“ approach of Eu$ftpga|i Community against Turkey, our country pursues its future, at least its eçjön'öm-lte»>fiiture having many social and political effects in a decisive and determined'' way!\in European Community that is on the way of becoming a ”regional state“. K^ ? V.c { The evaluation of integration with EC from the point of capital markets;esonsists the main topic of this study. In the first section of the study, European Community28 Capital Markets, EC regulations on capital markets, financial harmonizations and harmonization problems were reviewed and a preliminary information was formed for the evaluation of Turkish capital market. In the second section, the harmony between EC capital markets and Turkish capital market that is in course of customs union and aiming full membership was reviewed, and certain differences were brought out. While bringing the financial services together, The European Community is being directly affected from financial innovations and diversification, technology, stock bonding, competition and regulations that are consequences of international development. Nevertheless, the development of world financial markets are oriented towards regulationing rather than deregulationing. In other words, to complete the regulation of the markets and reach a full effectivity through densification on the management and controlling activities are above the others. Besides the need for internalization and protecting and developing the international competing power, the direct and indirect effects of harmonization in the goods and service movements and the time and cost efficiency of technological development and innovations inclined EC inclination towards capital markets integration. The capital markets have weight not only in developing the internal economy of EC. but also in increasing the competition power against economies such as USA or Japan. England's being the only important power among the EC countries against both USA and Japan capital markets, is an interesting factor in the forming of a sole EC capital market. Though England does not represent the greatest power in EC economy, its high development level in capital market leads the capital markets of EC economy to open themselves for foreign competition through English capital market. In fact, while England's share in total EC GNP is 15%, its share in stock shares capitalization is around 38%. The performance of competition in investment services that startettin the..be^nning of 1996, can be considered as the most important developmelit' in j)fovrdi% competition through EC. Thus, basic principles such as License, -Mutf-af Recognizing Principle and Origin Country Control were started to be applied, to all financial institutions active in capital markets. ”'“..'29 The most important benefit of a sole European Capital Market will be the cost reducement of financial procedures. EC investors will be able to review in details all the investment possibilities from one source and pricing of stock and bonds through Community will be performed at an efficient level. The developing markets will complete their course of developments in a shorter time by the help of already developed market possibilities. When Turkey is considered under the light of all these evaluations up to now, it is observed that Turkey has an expectation for being entitled to full membership parallel to course of customs union as it is determined by mutual agreements and prospects of Turkey. The mentioned membership will retain not only the free circulation of the goods but also the labor, capital and services. Also the harmonization of Turkey with EC in the scope of capital markets should be considered not only from the point of full membership but also from the point of conveying economical development and competition possibilities up to level of EC countries. To near Turkish economy to minimum EC standards, to furnish harmonization in the operation and application principles of organized markets, legal and technical harmonization in the control mechanism of capital markets and operation of financial operations and to provide a competitional environment are the issues on which Turkish capital market should demonstrate a high performance during the course of unification with EC. Economical development and stability are among the basic criteria of EC. Our country has a greater economy than the six EC countries with a GNP of 1 70 billion Dollars. Furthermore, it is ready for competition with its sectors having comparative superiority such as textile and ready made goods, glass, cement and tourism. However, with a GNP per capita of 2500 dollars, Turkey is quite behind EC average of 15000 dollars. According to another economical and monetary uöifrcation criteria of EC, the public deficits should not exceed 3% of GNP. Being such rate above 10% in our country, with an inflation rate of 70-80%, and nonexistence ofVprice stability for long years are among our economical harmonization problems.”-30 The most important effect of the customs union with EC and complete integration that is becoming gradually possible, on Turkish economy is expected to occur in the established market behaviors of industry and production pricing methods. Expanding market and increasing competition will result in the elimination of deficient, inefficient organizations in Turkish economy and extermination of effectivity losses in the current monopolistic pricing. When we put Turkish Capital market under magnifying glass, we see that“Sole License”valid in EC gives financial institutions the freedom of servicing in all EC countries. When a EC country financial organization wants to be active in Turkey, it is subject to Turkish national law and regulations. In full membership course, it is foreseen that Turkey will also have servicing freedom. When we consider Turkish Stock and Bonds Exchange Market which has a primary role in the study, we see that İMKB is beyond many EC countries from the point of today's market criteria and performances. The role of stock market in the economy is gaining weight. By the end of 1995, the share of stock market capitalization in GNP is 15%. IMKB's access to electronic buying-selling system is an important indication of a technological harmonization with EC. However, despite all these affirmative data, there are still some handicaps. When the capital market is evaluated from the point of primary markets, we observe that the public share in the total stock and bonds issuing volume is 90% and the share of the private sector is 10%. The primary markets in the capital markets became where the banks provide funds. The volume of Stock and bonds on Assets is above the private sector stock shares and debting instrument issuing volume. The private sector almost does not issue security and financing bonds. This situation shows that the companies still prefers to be in debt to banking system. The volume of issued stock shares is under the volume of issued Stock and Bonds on Assets. The increase in the share stocks is due to the current stock market companies' addition of revalidation value, increase fund, ç^ü^ılloıı^^les and similar funds and incomes to their capitals rather than new 6pjmin|^öNpua|jİ. This situation shows that only a few stock shares are sold in the secofMV^VP-T^fc^d the market has a strong speculative nature.. :«'f'T»^4'V-31 Briefly, today's structure seems unfamiliar with economy. Stock market is an important institution of democracy. Though we should be reviewing stock market for an evaluation of economy, it is obvious that the address is not Istinye hill. The subject that should be added to the table we drew, is the perception of regulating and auditing organs. Here, I mention IMKB which is responsible to draw the rules of the game and have the game played in accordance with the predrawn rules as well as arranging the rules binding Capital Market Council and members. In such a course of integration, the issues on which both institutions should concentrate are reviving new financial instruments and institutions and providing reliable, candid, and stabile operation of the current markets and increasing stock market's representing capability of economy. On the other hand, IMKB investors being generally individual despite the institutional EC investors brings our the need for making institutional investors in Turkey more effective. When type A and other investment funds and portfolio of investment partnerships are reviewed the weight of public stock and bonds is recognized immediately. This results in the restricted functions of institutional investors in source transferring. In other words, funds and partnerships could not become institutions transferring funds to organizations. This situation is a natural consequence of the organization's financing preferences. A company which is quoted to stock exchange market in EC, has also the right to be processed in the related stock market. However, in IMKB, being quoted does not retain the right of processing. According to EC regulations, excluding the exceptions, the rate of openness to public is 25% while it is 15% in IMKB. Although, such rate may be kept at low level in the developing stage of IMKB to encourage public demands, it should be increased gradually in order to gain depth. When we review foreign portfolio investments towards Turkey, we have the impression that the investments made up to now were generally short termed and made in order to assess the opportunities arising from the market /circumstances. ?' f % * ? ' \ ?
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