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Turkey is at the border of Europe and Asia, bringing together the different cultures for trade relations and for developing a sense of community. Turkey is often believed to be a part of the EU; however, the discussions to enter the EU as a direct member has been ongoing for many years. At present, Turkey does not come under the EU MiFID guidelines, and hence, Forex brokers in Turkey are not allowed to operate in the EU without a valid EU Forex broker license. Turkey has experienced its fair share of Forex broker scams during the past decade, which has resulted in the Turkish Government’s introduction of the Capital Markets Board of Turkey (CMBT) into the retail Forex trading industry. CMBT, also known as the Sermaye Piyasasi Kurulu (SPK) in Turkish, is a securities market regulatory organization that controls the entire capital market of the Turkish economy under direct guidelines imposed by the Turkish Government. CMBT is an independent self-regulatory organization that operates on funds generated through membership fees and fines levied on its member firms for deviation from regulatory guidelines. While the CMBT runs by using its funds, the CMBT does have an option to seek funds from the Government if it falls short. However, CMBT hasn’t required external funding from the Government throughout its entire history, which is a great testament to the effectiveness of the organization in regulating its member firms.
The Various Guidelines Followed By CMBT Regulated Brokers
CMBT regulated Forex brokers are regulated according to the strategic objectives developed by the CMBT for regulating all financial firms operating in the country. The primary aim for the CMBT is to ensure investor protection and to maintain the trust and confidence among investors while dealing with companies functioning in the Turkish financial markets. CMBT has a highly detailed regulatory structure derived from the global norms of capital market regulation, which is visible in the way the Turkish regulators regulates its Forex brokers as well as other financial market participants. The Turkish authorities have adopted the Capital Markets Law (CML) that governs the operational protocols and legal framework for regulating as well as supervising financial firms to regulate their conduct in the capital markets. CMBT works towards achieving a strong balance between the demand and supply of the markets and is intent on maintaining the transparency of the financial markets through a proactive approach. By improving the competitiveness and fairness in the markets, CMBT is hopeful of offering a modern financial infrastructure that is in line with all modern regulations, including the ones that are adopted by the EU MiFID agencies. Turkey is committed to satisfying all MiFID derivatives and international anti-money laundering guidelines in a bid to enter the EU and become a permanent member. Therefore, CMBT Forex brokers are considered to be highly reliable agencies that work in the best interests of its clients without indulging in any consumer abuse of financial frauds. The CMBT is also aware of the potential pitfalls of the Forex markets and is working on educating its investors regarding the perils of using leverage on the highly volatile Forex markets. The CMBT President, Vahdettin Ertaş, had officially gone on record stating the risks of the market and how only less than 12 percent of the traders make money in the retail FX market. The CMBT President believes that at least 88 percent of traders succumb to losses due to high leverage, which can wipe out a trading capital with just a single percentage move in the price of currency pairs. The CMBT is also aware of the implications of advertisements that lure amateur traders into the world of Forex trading on the pretext of instant riches. Various influential figures in the Turkish Government is seeking reform in the rules of trading that will be made applicable to CMBT regulated brokers while offering their services to Turkish investors. Changes in advertising rules along with modifications to the existing trading conditions are seen as viable alternatives to help reduce the risk of trading for modern investors. The CMBT has also made it abundantly clear that all Forex brokers in Turkey should possess a valid CMBT license, and all other brokers without a valid license are banned from offering their services to Turkish citizens.
Why Does Turkey Only Allow CMBT Forex Brokers To Operate In The Country?
Turkey is comparatively new when it comes to regulating Forex brokers, only having introduced a regulatory organization since 2011. Initially, Forex brokers were allowed to offer their services to Turkish investors without any valid licenses, which led to an immense amount of broker scams. The Turkish Government could not have any control over the fraudulent practices followed by unregulated brokers, which formed the core premise for the country to adopt a strict and efficient regulatory organization for combating financial scams. Turkey is considered as one of the most leading new countries in the world that were able to turn around their fortunes in the FX markets by actively dealing with broker scams. CMBT along with the help of Government authorities started banning brokers that did not obtain a valid CMBT (or SPK) license for operating in the country. The Government even started blocking websites of overseas Forex brokers that did not have Turkish-specific websites designed exclusively for the Turkish investors. Therefore, the CMBT has been widely successful in eradicating most instances of financial scams, which led to another problem. CMBT’s active role in eradicating financial scams also affected existing Forex brokers that were offering high-quality FX services in the country. Regardless of its reputation in the industry, all Forex brokers were banned from the country if they did not have a valid CMBT license. Such a move reduced the number of brokers available in the Turkish markets to as low as seven brokers during the initial years of regulation. Slowly, the CMBT was able to work with mainstream brokers and other leading regulatory agencies by approving more than 50 brokers under the CMBT regulatory framework to provide better options to its investors. At present, some of the leading mainstream Forex brokers have a valid CMBT license to be able to cater to the exact requirements of investors and traders from Turkey. Although retail FX trading is not controlled in any manner, there are Government officials who consider the Forex Markets to be solely designed for large industries and institutional investors. Therefore, there is a good chance that the CMBT, along with input from the Turkish legislature, to curb the freedom of trading and adopt several different trading conditions that might inhibit the freedom offered to retail Forex trading. CMBT Forex brokers should provide complete peace of mind, as the CMBT offers several advantages to the investors who trade with CMBT regulated Forex brokers in Turkey. Rules such as keeping clients in segregated accounts, protecting investors under an Investor Protection Fund, routine auditing, following ethical practices in advertising, and ensuring adequately trained staff for offering high-quality products enable the CMBT to maintain a fair and ethical marketplace that is devoid of any scams. The CMBT is also known for its severe sanctions against member firms, which further reinforces the authenticity and reliability of Forex brokers in Turkey.