TAKASBANK Derivatives Market Clearing House Operations London December

TAKASBANK Derivatives Market Clearing House Operations London, December, 2004 1

GENERAL INFORMATION ON TAKASBANK 2

Unique Functions of Takasbank in Turkey ¨ Clearing and Settlement Institution for the Istanbul Stock Exchange (ISE) ¨ Central Securities Depository of Turkey ¨ Money Market for ISE Members ¨ Official Custodian for Pension and Mutual Funds ¨ National Numbering Agency of Turkey ¨ Clearing House for the TURKDEX 3

Bridge Role in The Turkish Financial Markets Capital Markets Board Capital Markets Intermediaries Istanbul Stock Exchange Issuers Central Registry Institution Banking Regulation and Supervision Board indirect TURKDEX Investors TAKASBANK Banks Central Bank of Turkey 4

Shareholder Structure The total value of paid-in capital is USD 41. 3 million 5

Operational Efficiency ¨ Off-site Disaster Recovery System with an operations center; with real time backup facility. ¨ All operational program products are developed in house ¨ All members are online connected to Takasbank system and using our proprietary program products. ¨ The Takasbank Electronic Transfer System (TETS) enables brokerage houses to transfer both securities (G-Bonds &T-Bills) and cash in and out of the Takasbank system electronically in realtime connection with the Central Bank's EFT / ESTS systems. ¨ Real-time connection to Turkdex, Istanbul Stock Exchange, Central Bank of Turkey and Capital Markets Board. 6

Custody System with Numbers Equities Bonds & Bills Pension and Mutual Funds Portfolios Asset Value under Custody (17. 11. 2004) USD (Billion. ) 25. 7 20. 7 Total number of investor sub-accounts (equities) with balance 17. 1 1, 111, 356 7

Organized Market Clearing and Settlement with Numbers (Equities) ¨ Number of Members ¨ Number of Companies Traded: 295 ¨ Average Daily Trading Volume: 579 ml$ ¨ Average Daily # of Contracts : 202, 000 ¨ G-Bonds&Bills Market Clearing and Settlement ¨ Number of Members ¨ Average Daily Trading Volume: OP&SM: 980 ml$ : 113 : 140 Repo M: 4. 126 ml$ 8

DERIVATIVES MARKET CLEARING HOUSE 9

Takasbank’s functions ¨ Clearing member selection with Turkdex, ¨ Central counterparty to derivative contracts, ¨Determining ¨Collateral ¨Mark the collateral type and procedures, valuation daily, to market daily margining on sub account basis, ¨Monitoring collateral composition and margin call, ¨ Managing of collaterals in case of default, ¨ Guarantee fund management, ¨ Cash collaterals management, ¨ Member training. 10

General Clearing Principles Margin deposit requirement before buying or selling of a derivative contract. ¨ Futures contracts are marked-to-market daily and final settlement on T+0. ¨ ¨ Contracts are settled on cash basis. ¨ Margin calls are paid in cash (TRL). Clearing system and collateral management system are totally customer based. ¨ On line real time connection (Trading System Messages Router) with TURKDEX. ¨ ¨ Takasbank guarantee is limited only with the following sources; Ø Margin collateral Ø Guarantee fund 11

Membership types General Clearing Member (GCM): ¨ GCM is authorized to trade and clear its own portfolio and clients’ trades ¨ GCM may addititonally provide clearing services to the non clearing members, who are also authorized to trade in Turkdex. Direct Clearing Member (DCM): ¨ DCM is only authorized to trade and clear its own portfolio and clients’ trades. ¨ DCM can not provide clearing services to non clearing members. 12

Membership requirements ¨ Capital adequacy, ¨ Sufficient financial resources, Certified as a derivatives intermediary by the Capital Markets Board, ¨ Approval of Turkdex Board of Directors as a market member, ¨ ¨ Sign Clearing Membership Contract, Fullfillment of clearing member obligations such as contribution to the Guarantee Fund. ¨ 13

Account types ¨ Portfolio ¨ Market maker ¨ Client ¨ Global (omnibus) 14

Collateral types ¨ Initial margin ¨ Maintenance margin ¨ Extra-ordinary margin ¨ Guarantee fund collaterals 15

Eligible collateral margin ¨ TRL ¨ Foreign currency (USD, EUR) ¨ FX Indexed Bonds ¨ G-Bonds & T-Bills ¨ Equities (ISE 100) ¨ Mutual fund certificates 16

Composition of collaterals 17

Collateral Deposit/Withdrawal Operations Collateral deposit/withdrawal takes place in the electronical environment. ¨ Collaterals deposit to relevant a/c by the clearing members. ¨ ¨ Depositing is made sub a/c basis. Account owners can get available balances through members. ¨ ¨ Available collaterals are calculated as follows: Available Collateral = Deposited - Required +/- Profit Collateral margin (Loss) 18

Collateral Valuation Collateral valuations is done by Takasbank at the and of day process with the following price data: ü for Bonds valuations, by ISE calculated prices which is used in Repo collateralization, ü for Equities valuations, by ISE market closing price, ü for FX valuations, by Central Bank FX price, ü for Mutual Fund valuations, by unit price. 19

Daily Mark to Market ü Daily losses are cut from the cash collateral while profits added to the cash collateral on the same day. ü Because the loss is cut from the cash balance, if the collateral is below the Maintenance Margin, margin call announcement is made by Takasbank. ü Daily profits can be withdraw after the session, as long as the collateral composition is satisfied. 20

TURKDEX DERIVATIVES MARKET TRADING Session hours: 10 am- 3 pm TURKDEX Buying member 2 Buy Order RISK CONTROL H 3 Tot. Col > Req. margin Order canc. E Order match Position Col. deposit Sell Order Trading Engine 4 Selling member COLLATERAL Cash+Non cash = Total collateral 1 Collateral TAKASBANK Col. Deposit or withdraw request are collected and transmitted to Turkdex Col. deposit 21

TURKDEX DERIVATIVES MARKET CLEARING TURKDEX TAKASBANK DM 14: 45 Turkdex DM is updated with the latest collateral balance. 15: 15 Turkdex announce the settlement price and calculates the margin call amount. DM 15: 15 Takasbank receives the Req. Margin and Profit/Loss amounts and starts the daily mark to market operations. Losses cut from the cash collaterals. Margin call announcement to members. 15: 30 Last hour for the cash management order for daily cash withdrawals. 16: 30 Last hour for margin call. Daily profits are added to the cash collaterals. 16: 30 Cash management, money transfer and placement is exercised. 17: 00 Last hour for omnibus position details. 18: 00 + End of day operations (valuation, reporting, accounting, cash management, a/c transfers etc. ) MEMBER MBS SCREEN (WAN) -Deposit-withdr. -Omnibus a/c -Default -Gurantee fund -Cash management -Reports (MIS) -a/c opening 22

Guarantee Fund ü Guarantee Fund is established by the Clearing House with the clearing members’ contribution. This fund makes payment in case of the defaults. In any default, the defaulting member’s contribution is used first and if necessary then non defaulting members’ contributions are used on a pro rata basis. ü Clearing members must contribute this fund with cash and non cash collaterals. Fixed amount of the contibution is determined by the membership type, while variable amount is calculated with open positions and volume of the member. 23

Eligible Collateral Types for Guarantee Fund ¨ TRL ¨ Foreign currency (USD, EUR) ¨ FX Indexed Bonds ¨ G-Bonds & T-Bills ¨ Mutual fund certificates ¨ Letter of Guarantee 24

Cash Management ü Cash margins and Cash Guarantee Fund contributions are subject to cash management. ü Contract based margin colleteral is subject to cash management and net interest income is added to cash collateral following business day. 25

THANK YOU TAKASBANK 26