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Turkish FX Trading Community Protests New Restrictive Laws

A raft of changes introduced by the foreign exchange regulator in Turkey has alarmed the country’s trading and investor community, giving rise to a petition campaign to roll back the new rules.

Last week, the Capital Markets Board of Turkey (CMB) announced changes to the size of the minimum deposit amount required for starting a foreign exchange trading account in the country as well as the maximum leverage available for trades. The maximum leverage on foreign exchange trading accounts is set to be reduced to 1:10 and the size of minimum deposit required while opening an account will be increased to at least TRY 50,000 (around $13,500).

According to Akın Abbak, an attorney and a Managing Partner at Abbak Attorneys at Law Istanbul, the new rules are likely to result in a sharp decline in trading volumes as most of the customer base in the country likes to trade on leverage levels of around 1:100. He noted that brokerages will be highly affected adding that the changes should have been discussed with the participants. He also highlighted that there are over 6,500 people working in Turkey’s brokerages.

Concerned about the impact of the new regulations, members of the Turkish broker house association have set up a dedicated website hosting a petition that protests these tough regulations. The association states that while the CMB introduced the new rules in a bid to protect small and amateur traders, they are unfair to experienced investors who are keen to trade in foreign exchange.

Members pointed out that the restrictions might nudge these investors towards unregulated and illegal brokerages who operate offshore, which could result in exposing them to even higher risks, defeating the purpose of the new rules.

In a statement, the association said,

The new restrictions will be a return to the situation before 2011, when things radically changed due to the introduction of regulatory changes following years in which forex clients suffered from scams and frauds

The association is concerned that these changes will place small time investors in a precarious position as it will not only curtail their opportunities to make significant investment trades but also push them to experiment with unregulated brokers or illegal trading firms that run numerous advertisements on the internet.

Furthermore, several Turkish websites on which foreign exchange traders currently advertise might be hit by a drop in their ad revenue. According to the members of the brokerage association, the right way to protect investors was to focus on educating them rather than on curtailing trading within the country.

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