DEMUTUALIZATION OF BORSA ISTANBUL_{Lessons from the American Experience}

Table of Contents 

PREFACEIII 

DEDICATION.III 

ACKNOWLEDGEMENTSIV 

1. INTRODUCTION: A REVIEW OF THE TURKISH EXPERIENCE.1 

1.1 Statement of the Problem2 

1.1.1 Lessons from Role Model Countries’ Experience 3 

1.1.2 Demutualization of the Stock Exchange in Turkey7 

1.2 Purposes of the Book 14 

1.3 Significance of the Research 15 

1.4 Research Questions.16 

1.5 Methodology17 

1.6 Recommendations.17 

1.7 Roadmap .19 

1.8 Conclusion.20 

2. CHAPTER TWO: BACKGROUND AND LITERATURE REVIEW 21 

2.1 Background.21 

2.1.1 Historical Developments of Stock Exchanges as SROs.22 

2.1.2 Fundamental Roles of Stock Exchanges 23 

2.1.3 Main Motivations for Demutualization of Stock Exchanges .26 

2.1.4 Demutualization Trend for Stock Exchanges.28 

2.1.5 Benefits of Demutualization 29 

2.1.6 Regulatory Perspective of Demutualization in Stock Exchanges 30 

2.2 Review of the Literature on Demutualization of Stock Exchanges . 33 

2.2.1 The Administrative Agencies’ Solutions .34 

2.2.2 Stock Exchanges’ Corporate Governance Solutions: Establishing a “Separate Subsidiary of the Exchange Operator” .37 

2.3 Conclusion.38 

3. CHAPTER THREE: AN OVERVIEW OF THE U.S. EXPERIENCE .39 

3.1 Introduction 39

3.2 The Experience of the Sros in the U.S. Securities Industry from the mid 1850s to the 1990s: The Evolution of the Structure of the Stock Ex-changes . 42 

3.2.1 Does the Self-Regulatory Regime Benefit the U.S. Securities Industry? 42 

3.2.2 Developments of Stock Exchanges Before Enactment of the  Securities Exchange Act of 1934 45 

3.2.3 The Impacts of the Securities Exchange Act of 1934 49 

3.2.4 Sectoral Developments Before Enactment of the Securities Acts Amendments of 1975 52 

3.2.5 A Short Review of the Securities Acts Amendments of 1975 . 54 

3.2.6 Reorganization of the NASD in 1996 59 

3.3 Developments in the U.S. Securities Markets from the mid-1990s to the Present: A Brief Analysis of Demutualization of the U.S. Stock Ex-changes 60 

3.3.1 Motivations of the Stock Exchanges in the Pre-Demutualization Era 61 

3.3.2 A Short Review of the Regulation ATS . 64 

3.3.3 Reorganization of the NYSE in 2003. 66 

3.3.4 Regulatory Intervention in SROs: The Perspective of the SEC in De-mutualizing Stock Exchanges . 69 

3.3.5 Demutualization of the NYSE . 78 

3.3.6 Merger Movement in Publicly Traded Stock Exchanges . 81 

3.4 Conclusion . 82 

4. CHAPTER FOUR: THE DEMUTUALIZED BORSA ISTANBUL 84 

4.1 History of the Istanbul Stock Exchange from the Late Nineteenth Cen-tury to the Beginning of the Twenty-First Century . 85 

4.2 Impacts of the 1909 Securities and Currency Exchanges Act . 89 

4.3 Developments in the Stock Exchange in the Republic of Turkey from the 1920s to 1930s 91 

4.4 Enactment of the Act of Securities and Currency Exchange in 1929 . 92 

4.5 Sectoral Developments from the 1930s to 1980s 95 

4.6 Enactment of the First Modern Turkish Capital Market Act in 1981 . 96 

4.7 Sectoral Developments during the 1990s in Turkey 98 

4.8 Regulatory Developments of the Istanbul Stock Exchange From the Early 2000s to 2012 .100 

4.9 Review of the Demutualization of the Istanbul Stock Exchange 101 

4.9.1 Demutualization .102 

4.9.2 Domestic Mergers 103 

4.9.3 Establishment of the Istanbul International Finance Center 104 

4.9.4 The Legal Developments in 2014 104 

4.10 Legal Issues Arising From Demutualization of the Borsa Istanbul105 

4.10.1 Legal Status of the Borsa Istanbul.105 

4.10.2 Ownership of the Borsa Istanbul .107 

4.10.3 Allocation of the Regulatory Power108 

4.10.4 Potential Conflicts of interest 109 

4.10.5 Management of the Borsa Istanbul112 

4.11 Conclusion.115 

5. CHAPTER FIVE: RECOMMENDATIONS 117 

5.1 Establishment of an Independent Regulatory Unit of the Borsa Istanbul .117 

5.2 Limitation of Ownership of the Borsa Istanbul .119 

5.3 Clarification of the Legal Status of Borsa Istanbul .119 

5.4 Proposed Safeguards for Potential Conflicts of Interest .120 

5.4.1 Proposed Safeguard for the Members of the Borsa Istanbul 121 

5.4.2 A Proposed Safeguard for Market Operations of the Borsa Istanbul.121 

5.4.3 A Proposed Safeguard for Listed Issuers of the Borsa Istanbul .122 

5.4.4 A Proposed Safeguard for Shareholders of the Borsa Istanbul 122 

5.5 Three Proposed Rules for Corporate Governance of the Borsa Istanbul 122 

5.5.1 Appointment of Independent Directors123 

5.5.2 Establishment of the Committees of the Borsa Istanbul 124 

5.5.3 Imposing Higher Public Disclosure Requirements 125 

5.6 Conclusion 125 

6.CONCLUSION127

BIBLIOGRAPHY.133