Turkish market regulator opens probe into recent volatility

ISTANBUL, June 25 Tue Jun 25, 2013 2:14pm EDT

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ISTANBUL, June 25 (Reuters) - Turkey's Capital Markets Board has launched a detailed investigation into financial orders at brokerages, with a focus on foreign transactions, during a period of high market volatility in recent weeks.

In a confidential document seen by Reuters on Tuesday, the regulator requested information on brokerages' personnel, copies of research reports, logs of communications with customers and more for the period of May 20 to June 19 in what sources close to the matter described as unprecedented in scope.

An official at the Capital Markets Board told Reuters the watchdog had sent brokerages the document in its investigation into recent volatility in financial markets.

"This is a decision for a limited probe in connection with the period of high volatility in the market that began with the Federal Reserve's statement," the official said on condition of anonymity. "If you look at the date, you can see that it coincides with May 20, when the Fed began its statements."

The market volatility also coincided with three weeks of anti-government protests during which Prime Minister Tayyip Erdogan repeatedly accused market speculators of seeking to destabilise the Turkish economy.

VIOLENT PROTESTS

The protests began on May 28 against government plans to develop an Istanbul park but quickly mushroomed into riots in which some 5,000 people were injured and four killed.

Erdogan has accused domestic and foreign speculators and what he calls an "interest-rate lobby" of fomenting unrest to undermine Turkey's increasing affluence after inflation and interest rates have fallen to record lows during his decade in power.

"This is the most wide-reaching information request that I've ever seen," a broker with knowledge of the request said. The focus "on foreign transactions appears to try to identify the so-called interest-rate lobby."

Among the list of information sought by a June 27 deadline, the document said: "A need has arisen for information ... in the form of telephone records, written instructions, orders sent over the Internet and all chat logs related to the instructions sent to your institution by foreign clients between May 20 and June 19 (and) information on how orders from your foreign customers were received and how and through which channels these orders were delivered to the bourse."

Turkey's stock market has plunged 21 percent since May 20 and its lira has lost 5 percent of its value against the dollar, in part because of the protests but mainly on worries the U.S. Federal Reserve could taper its bond-buying programme which was aimed at stimulating the world's largest economy and has spurred investment in higher-yielding emerging markets like Turkey.

Fed Chairman Ben Bernanke said on May 22 that the U.S. central bank could slow down its bond buying, and on June 19 he said tapering of the programme could come by year end.

Traders have said that concerns about political stability stemming from the anti-government protests saw Turkish assets suffer steeper losses than other emerging markets.

Tens of thousands of people have staged protests in Istanbul, Ankara, Izmir and other major cities, with a diverse list of grievances against the government, including infrastructure development, Erdogan's perceived authoritarianism and signs of society's conservative tilt under his Islamist-rooted party's rule.

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