Istanbul Stock Exchange

–Authored by Mark Lusch

On our fourth day in Istanbul we paid a visit to the Istanbul Stock Exchange (ISE), the only stock exchange operating in Turkey. The ISE is relatively young compared with the major US based exchanges, established in 1985 and starting trade in 1986 with 45 companies. However, we also learned that the ISE is not the first instance of security exchange in Turkey with roots going back to 1866 when the Ottoman Empire established the Dersaadet Securities Exchange. Today the ISE is home to five markets with the largest being the National Market which lists 241 companies.

Our visit consisted of two portions, first we went through a presentation on the history and operations of the exchange including a question and answer session. Some interesting points from the presentation were the fact that roughly 66% of the publicly held portion of the market is held by foreign investors; this is partly due to the fact that traditionally security investment has not been a popular way for Turkish citizens to invest their money. Additionally, we discussed some of the efforts from the ISE to encourage more companies to list on the exchange including the creation of a emerging companies market which allows companies to list on a alternative market with lower listing standards. The idea is that companies would progress while on the emerging market to eventually list on the national market. The returns of these efforts were seen in 2010 when the ISE had 22 IPOs versus 1, 2, and 9 in 2009, 2008, and 2007 respectively.

The second portion of our visit was a trip to the trading floor, which was surprisingly quiet compared to how trading floors are typically portrayed in the media. It was a great experience to actually get to see the trading floor of an exchange in a foreign country. The ISE’s floor has become less utilized over the years as technology has allowed traders to work remotely from the exchange; however, there are still a number of traders who choose to come into the exchange daily or periodically to conduct business. In addition, the ISE doesn’t have any plans to get rid of the floor despite its lower utilization because it is still representative of the spirit of the exchange.

Overall, the opportunity to visit an exchange in a foreign country is something that many of us would not have been able to do without this global trip. We want to give a special thanks to the Istanbul Stock Exchange especially Erlap Polat and E. Ceylan Yilmaz for together a great presentation and trading floor visit as well as fellow MBA student Canan Özkan for arranging our visit.

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