Communiqué on Principles Regarding Repo and Reverse Repo Transactions of Intermediary Institutions

COMMUNIQUÉ ON PRINCIPLES REGARDING REPO AND REVERSE REPO TRANSACTIONS OF INTERMEDIARY INSTITUTIONS (III-45.2) (Published in the Official Gazette edition 29554 on 06.12.2015) List of Amendments:

1. Communiqué (III-45.2.a) Amending the Communiqué (III-45.2) on Principles Regarding
   Repo and Reverse Repo Transactions of Intermediary Institutions published in the Official Gazette edition 31351 on 31.12.2020. FIRST PART Purpose, Scope, Grounds and Definitions Purpose
   ARTICLE 1 – (1) The purpose of this Communiqué is to set down the requirements to
   be complied with by intermediary institutions in the course of their repo and reverse repo transactions. Scope
   ARTICLE 2 – (1) This Communiqué covers repo and reverse repo transactions to be
   performed by intermediary institutions between themselves or with other natural persons or legal entities on financial institutions referred to in Article 6. (2) Intermediary institutions may not engage in repo and reverse repo transactions outside the scope of provisions of this Communiqué. (3) Transactions conducted by CBRT within the frame of open market transactions are beyond the scope of this Communiqué. Grounds
   ARTICLE 3 – (1) This Communiqué has been prepared in reliance upon first paragraph
   of Article 45 of the Capital Markets Law no. 6362 dated 06.12.2012.
   Definitions
   ARTICLE 4 – (1) For the purposes and in the context of this Communiqué:
   a) “Exchange” refers to exchanges defined in subparagraph (ç) of first paragraph of
   Article 3 of the Capital Markets Law;
   b) “Law” refers to the Capital Markets Law no. 6362 dated 06.12.2012; c) “Board” refers to the Capital Markets Board; ç) “Repo” refers to sale of financial statements with a commitment of repurchase; d) “Reverse repo” refers to purchase of financial statements with a commitment of sale;

e) “Takasbank” refers to İstanbul Takas ve Saklama Bankası Anonim Şirketi (Istanbul Settlement and Custody Bank Inc.); f) “CBRT” refers to and stands for Türkiye Cumhuriyet Merkez Bankası Anonim Şirketi (Central Bank of the Turkish Republic). SECOND CHAPTER Principles Regarding Repo and Reverse Repo Transactions Intermediary Institutions Eligible for Repo and Reverse Repo Transactions, and Notification Requirement
ARTICLE 5 – (1) Intermediary institutions intending to engage in repo and reverse
repo transactions are must hold as a minimum licenses for order execution or trading in own account activities pursuant to Articles 17 and 22 of the Communiqué on Principles Regarding Investment Services and Activities and Ancillary Services (III-37.1) published in the Official Gazette edition 28704 on 11.07.2013. (2) Intermediary institutions shall notify the Board before starting repo and reverse repo transactions. Following delivery of notification sent to the Board, repo and reverse repo transactions shall be started to be conducted in accordance with the principles set down in this Communiqué. Financial Instruments Eligible for Repo and Reverse Repo Transactions of Intermediary Institutions
ARTICLE 6 – (1) Financial instruments eligible for repo and reverse repo transactions
are listed below:
a) Government debt instruments issued in Turkey or abroad, including government bonds, treasury bills, revenue indexed securities and revenue sharing certificates, as well as lease certificates issued in Turkey or abroad by asset leasing companies established within the frame of the Law on Regulating Public Finance and Debt Management no. 4749 dated 28.03.2002; b) Liquidity bills issued by CBRT; c) (As amended: OG 31.12.2020 – 31351) Debt instruments issued under the Law by the Privatization Administration, Turkish Wealth Fund Management Inc., Turkish Wealth Fund, Housing Development Administration, public economic enterprises, local administrations and their associated and affiliated administrations, enterprises and corporations; ç) Debt instruments issued in Turkey or abroad by issuers resident in Turkey, also including those issued by banks; d) Lease certificates issued in Turkey or abroad by issuers resident in Turkey; e) (As amended: OG 31.12.2020 – 31351) Asset backed securities, covered bonds, mortgage-backed securities and mortgage covered bonds, lease certificates and project backed securities issued in Turkey or abroad by issuers resident in Turkey; f) Shares determined and by Borsa İstanbul A.Ş. for repo and reverse repo transactions in Borsa İstanbul A.Ş. markets.

g) (Additional Subparagraph: OG 31.12.2020 – 31351) Units of investment funds with the exception of hedge funds. ğ) (Additional subparagraph: OG 31.12.2020 – 31351) Debt instruments, lease certificates, real estate certificates project-backed securities, asset backed securities, covered bonds, mortgage backed securities and mortgage covered bonds issued by the Ministry of Treasury and Finance and its institutions and organisations, and foreign institutions with the status of international organisation where CBRT is a member or shareholder. (2) Financial instruments mentioned in subparagraphs (ç), (d) and (e) of the first paragraph, which are traded in local or foreign exchanges or other organized marketplaces may be the subject of repo and reverse repo transactions. (3) (Additional paragraph: OG 31.12.2020 – 31151) The use of assets listed in subparagraph (ğ) of this paragraph in repo and reverse repo transactions may only be possible after the date that will be specified by Takasbank upon submission of a request relating thereto. Special Provisions Relating to Valuation and Margin Ratios of Traded Financial Instruments
ARTICLE 7 – (As amended: OG 31.12.2020 – 31351) (1) Principles and provisions
relating to valuation and margining of financial instruments traded hereunder shall be determined, regardless of the provisions of this Communiqué, by the exchange for all repo and reverse repo transactions executed in the exchange, and by the central clearing institutions acting as central counterparty for all repo and reverse repo transactions executed in the exchange or over-the-counter market and settled by a central counterparty. (2) As for repo and reverse repo transactions executed outside the exchange and not settled by a central counterparty:
a) Financial instruments benchmark values for which are published in the Official Gazette shall be valued over those prices; b) Financial instruments benchmark values for which is not published in the Official Gazette, but which are traded in the exchange shall be valued over weighted average prices or rates in the relevant exchange as of the valuation date, or in the case of exchanges applying two sessions in a day, over their weighted average prices or rates in the second session, or financial instruments which are traded in the exchange, but have not been traded in the exchange on the valuation date, over their weighted average prices or rates as of the last trading date thereof; c) Financial instruments benchmark values for which are not published in the Official Gazette, and which are not traded in the exchange shall be valued in reliance upon the Turkish Accounting Standards / Turkish Financial Reporting Standards issued by the Public Oversight, Accounting and Auditing Authority. ç) Investment funds shall be valued in reliance upon provisions of regulations of the Board on financial reporting principles of implemented with respect to the valuation of investment funds. d) Financial instruments under subparagraph (ğ) of the first paragraph of Article 6 shall be valued in reliance upon the Turkish Accounting Standards / Turkish Financial Reporting Standards issued by the Public Oversight, Accounting and Auditing Authority.

(3) With respect to margining for financial instruments valued as per subparagraph (a) of the second paragraph, 100% of valuation prices shall be considered. (4) With respect to margining of financial instruments valued as per subparagraph (b) of second paragraph, 75% of valuation prices shall be considered, while for financial instruments issued by issuers with a long-term investment grade rating by rating agencies established in Turkey and authorized by the Board or by the Banking Regulation and Supervision Agency for rating activities specified in the regulations of the Board pertaining to rating activities and rating agencies in capital markets, or by international rating agencies allowed by the Board or by the Banking Regulation and Supervision Authority to deal with rating activities in Turkey, or financial instruments holding said rating, 85% of valuation prices shall be considered. (5) With respect to margining of financial instruments valued as per subparagraph (c) of the second paragraph, 65% of benchmark values shall be considered, while for financial instruments issued by issuers with a long-term investment grade rating by rating agencies established in Turkey and authorized by the Board for rating activities specified and defined in the regulations of the Board pertaining to rating activities and rating agencies in capital markets or by international rating agencies allowed by the Board to deal with rating activities in Turkey, or financial instruments holding said rating, 75% of valuation prices shall be considered. (6) With respect to margining of investment funds valued as per subparagraph (ç) of the second paragraph, valuation price shall be the latest price reported to Takasbank on the day the assets were used in a repo transaction and for margining; a) 95% of valuation price shall be considered with respect to sub-funds of money market umbrella funds, b) 90% of valuation price shall be considered with respect to sub-funds of debt instrument umbrella funds, and exchange traded funds emulating a debt securities index, c) 80% of valuation price shall be considered with respect to sub-funds of share umbrella funds, and exchange traded funds emulating a share index, ç) 85% of valuation price shall be considered with respect to sub-funds of other umbrella funds, and other exchange traded funds (with the exception of sub-funds of hedge umbrella funds), d) 75% of the valuation price shall be considered with respect to real estate and venture capital investment funds. (7) With respect to the margining of financial instruments valued under subparagraph (d) of the second paragraph, 100% of the valuation price shall be considered. (8) In the event that cash funds and collaterals covered by repo and reverse repo transactions are in different currencies, margin rates specified in the third, fourth, fifth, sixth and seventh paragraphs shall be applied at a rate which is 5% lower. (9) In the event that cash funds and collaterals covered by
repo and reverse repo transactions are in different currencies, valuation shall be based on the currency of cash funds covered by the subject transaction, and the currency of financial instrument shall be converted into that currency for valuation purposes.

(10)The Board is authorized to adjust margin rates specified in this Article depending on the definition and characteristics of financial instruments eligible for repo and reverse repo transactions. Currency, Maturity and Interest Rate
ARTICLE 8 – (1) Cash funds and margins covered by repo and reverse repo
transactions may be in Turkish Lira or in any foreign currency.
(2) In repo and reverse repo transactions, maturity may be freely determined, provided that the date of redemption of the relevant financial instrument is not overrun. Maturity date shall be on a business day. (3) Rate of interest to be applied in repo and reverse repo transactions shall be determined by the parties thereto. Principles of Repo and Reverse Repo Transactions
ARTICLE 9 – (1) Repo and reverse repo transactions are executed according to the
following principles:
a) (As amended: OG 31.12.2020 – 31351) A written framework agreement setting down the general principles of transactions is required to be entered into between the parties in accordance with regulations of the Board on documentation and record keeping with respect to investment services and activities and ancillary services. b) Transaction shall be completed in accordance with the terms and conditions agreed upon between the parties, and the price of financial instrument shall be paid as set forth in the framework agreement; c) Financial instruments shall be delivered in accordance with the procedures stipulated in the framework agreement, and these financial instruments shall be deposited by the intermediary institution within the frame of principles determined by Takasbank. ç) At the date of maturity of transaction, mutual obligations shall be performed, and the agreed upon price shall be paid to the relevant party, and the financial instrument shall be returned to the counterparty under principles stated in Article 10. d) In case of reverse repo transactions entered into by intermediary institutions with their customers, at the date of maturity of transaction, subject financial instruments shall be returned by the relevant intermediary institution from depository to counterparty under principles stated in Article 10. e) In case of reverse repo transactions entered into by intermediary institutions with investment firms, at the date of maturity of transaction, subject financial instruments shall be returned to counterparty between depositories on book-entry basis in reliance upon an instruction of the institution being party to the transaction. (2) With respect to financial instruments covered by repo and reverse repo transactions to be performed in marketplaces within the debt instruments market of Borsa İstanbul A.Ş., whether or not the deposit condition set down in first paragraph of Article 10 will be sought shall be determined by the Exchange.

(3) A framework agreement shall not be concluded for repo transactions to be executed between members within Borsa İstanbul A.Ş., but parties thereto may execute their transactions by issuing a statement drafted by Borsa İstanbul A.Ş. in connection therewith. (4) Intermediary institutions may trade in their own name and in the account of their customer or in their own name and account in the stock exchange, or only in their own name and account in the over-the-counter market. (5) Intermediary institutions may not use financial instruments of their customers in their repo transactions. Delivery Principles
ARTICLE 10 – (1) Financial instruments covered by repo and reverse repo transactions
are required to be deposited by intermediary institutions in accounts held with Takasbank or with correspondents of Takasbank. (2) Margins covered by repo transactions shall not be physically delivered to the buyer. All transactions shall be executed on book-entry basis. (3) Financial instruments bought by intermediary institutions through reverse repo transactions in marketplaces within Borsa İstanbul A.Ş., regardless of the counterparty thereof, may be re-used in repo transactions, provided that repo transactions are executed at a time between trading date and end of maturity, and that its maturity does not overrun the resale maturity. Trading Limits
ARTICLE 11 – (1) Difference between total repo amount balance and reverse repo
amount balance of intermediary institutions may not exceed 20 times their shareholders’ equity calculated as of the end of the previous month pursuant to capital adequacy requirements. (2) With the exception of transactions executed within Borsa İstanbul A.Ş. and transactions executed with CBRT, in transactions effected with the same person or entity, difference between repo amount balance and reverse repo amount balance of intermediary institutions may not exceed twice their shareholders’ equity calculated under the first paragraph. (3) (Additional paragraph: OG 31.12.2020 – 31351) The amount of financial instruments used in repo and reverse repo transactions, issued by intermediary institutions, or affiliates, subsidiaries and enterprises where they control capital, management and auditing, and by qualified shareholders of intermediary institutions with the exception of deposit and participation banks shall not exceed 10% of the shareholders’ equity of the intermediary institution calculated under the first paragraph. Supervision and Notification Requirements
ARTICLE 12 – (1) Without prejudice to the authorities and responsibilities of Borsa
İstanbul A.Ş. and other relevant institutions and entities under pertinent legislation, all repo and reverse repo transactions to be performed by intermediary institutions under the provisions of this Communiqué shall be supervised and monitored by the Board. (2) Intermediary institutions are required to notify Takasbank about transactions to be executed in the over-the-counter market. Principles regarding notification of transactions to be executed in the over-the-counter market shall be determined by Takasbank.

THIRD CHAPTER
Miscellaneous and Final Provisions
Principles on Recording of Transactions
ARTICLE 13 – (1) Repo and reverse repo transactions shall be recorded by Takasbank
in relevant member accounts without any recording in beneficiary accounts. (2) Intermediary institutions are required to keep both financial instruments placed as margin in repo and reverse repo transactions and the monetary values of said instruments by maturities and by customers in their accounting records. (3) Provisions of the regulations of the Board pertaining to collective investment schemes and private pension funds are, however, reserved. Repealed Communiqué
ARTICLE 14 – (1) The Communiqué on Trading of Securities with Repurchase or
Resale Commitments (Serial V, No. 7), published in the repeated edition 21301 of the Official Gazette on 31.07.1992 is hereby repealed. (2) All references made to the repealed Communiqué referred to in the first paragraph shall be deemed to have been made to this Communiqué. Transitional Provisions TRANSITIONAL ARTICLE 1 – (1) Intermediary institutions which have filed an application with the Board for order execution and/or trading in own account activity licenses pursuant to the Communiqué on Principles Regarding Investment Services and Activities and Ancillary Services (III-37.1) are required to execute their repo and reverse repo transactions in accordance with the provisions of this Communiqué until their application process is completed. (2) Intermediary institutions which have filed an application for order execution and/or trading in own account activity licenses or have already received this license, but whose repo authorization certificate was deemed void by the Board as of 16.12.2014 shall be considered to have sent a notification pursuant to Article 5, and if any of such institutions does not intend to engage in repo and reverse repo transactions, it is required to notify the same separately. (3) Narrowly authorised intermediary institutions or intermediary institutions that have filed an application to the Board to be authorised as such may only engage in trades aiming to close their existing positions after the date of publication of this Communiqué. Effective Date
ARTICLE 15 – (1) This Communiqué shall become effective as of the date of its
publication.
Enforcement
ARTICLE 16 – (1) The provisions of this Communiqué shall be enforced and executed
by the Board.