Leverage Effect: With the leverage effect, investors can buy or sell the futures contracts by investing considerably smaller amount of money than the actual size of relevant contract.
Short Selling Opportunity: Turkdex enables investors to do short selling.
Asset Diversification: Investors can diversify their portfolios by allocating the risk over different assets such as the contracts listed in the Turkdex.
Hedging: By using futures contracts, investors can reduce the risk of adverse price movements in an asset they have already invested in.
Cash Collateral Accretion: Total cash (TL) outstanding in the collateral accounts shall accumulate accretion by Takasbank on a daily basis.
The current exchange rate is 1,44 USD/TL. Consider an investor who expects USD will significantly appreciate against TL at the end of 3-months period. This investor with having TRY 300 in his account might purchase USD 214,28 at the spot market or might buy two USD/TRY futures contracts with the maturity of December 2009 at the Turkdex (long position). One USD/TRY contact size is equal to $ 1000. The impact of the exchange rate movements on his investment (300 TRY) will be calculated out of his total position size $ 2000 which is the total size of two contracts. This is called as leverage effect. If the investor wants to buy two USD/TRY contracts on day T, the TRY 300 in his collateral account will be frozen by Takasbank. Consider that the bid price of USD/TRY contract is 1,4315 USD/TRY at the Turkdex when he performs this buying transaction. According to the daily settlement prices determined by the Turkdex, the following table shows the gains and losses realized in the investor’s position.
If the daily settlement price on the transaction day is determined as 1,43, the investor’s loss realized as (1,4300-1,4315) x 2.000 = TRY -3. According to the daily settlement price on day T+1, he has a gain of TRY 20 calculated as (1,4400-1,4300) x 2000. The losses realized on the subsequent days are calculated in the same way. As a result of loss incurred at the Exchange on day T+3, his margin account drops below the maintenance margin level which is estimated as: [0,75 (maintenance factor) x TRY 150 (initial margin) x 2 (number of contracts)]. In this situation, Takasbank will place a margin call for the investor, and he must add up his collateral account to the initial margin level (TRY 300) at least. After the investor raises his account back to the initial margin level by debiting his account with 87 TRY, he changes his initial expectation on future exchange rate and decides to cover his present position by selling two USD/TRY contracts on day T+4. After these transactions his cash outflow shifts to TRY 387, but since the position is covered, he takes back TRY 300 which is the initial amount in his collateral account. The investor has a loss of TRY 87 a result of his transactions.
According to the tax legislation dated 28.03.2007, the withholding tax is determined as %0 for the capital gains obtained until 31.12.2008 from the transactions realized in the Turkdex. With the new regulation, the capital gains obtained as of 01.01.2009 from the transactions over shares and shares index contracts are subject to %0 withholding tax for both resident and non-resident investors. However, the capital gains obtained as of 01.01.2009 from the transactions over other contracts are subject to %10 withholding tax for resident individual investors and corporate investors, but those gains are still subject to %0 withholding tax for non-resident investors.
Taxation of Turkdex Futures Contracts
Withholding Taxation for Resident Investors in Turkey
|Shares and Shares index futures contracts
|Mutual Funds ||Other |
|Shares and Shares index futures contacts||%0||%0 |
Withholding Taxation for Non - Resident Investors
Banks and Similar Financial Institutions
|With a fixed place of business or permanent representative in Turkey
||Without a fixed place of business or permanent representative in Turkey