Turkey Punishes Brokerages for Short-Selling Rule Breaches

Turkey’s market regulator fined seven brokerages for violating short-selling rules and imposed a six-month trading ban on individuals it suspects of stock-price manipulation through social-media platforms.

The Capital Markets Board imposed fines totaling 16.7 million liras ($2.4 million) on the brokerages and 18 investors on Monday for contravening short-selling regulations in place since Feb. 25. In banning six people for manipulating the equity market through applications such as Telegram, it warned investors that paid membership of stock-tipping groups could make them complicit in crimes.

Turkish mom-and-pop traders are rushing to the nation’s equity market this year in record numbers because diminishing returns from fixed-income products and bank savings deposits have left them with few options. The number of equity market accounts has surged by 33% since the end of 2019 to 1.61 million as of July 13, according to figures from the Central Securities Depository.

Turkey Punishes Brokerages for Short-Selling Rule Breaches

The flood of new domestic investors has driven trading volumes in Turkish stocks to record levels, made the Istanbul market a world-beater in June and powered the longest-ever rally in the benchmark index. But the popularity of equities has also started to make some industry veterans nervous, while the stock exchange and market regulator have urged caution, warning investors to be wary of swindlers.

Any attempt to protect gains in Turkish assets through policy moves, such as short-selling bans, would likely prove unsustainable in the longer term, said Atilla Yesilada, an Istanbul-based economist for emerging-market analysis firm GlobalSource Partners.

“If such a rally ends with panic selling at some point, yet another generation would hate the stock market,” Yesilada said.

Authorities stiffened punishments for price manipulation in February as part of a broad overhaul of laws regulating capital markets.

The benchmark Borsa Istanbul 100 Index is up 3.1% this year, while the Borsa Istanbul Small and Midcap Industrials Index, which holds some of local investors’ favorite stocks, has raced up 124%.

©2020 Bloomberg L.P.

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