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The Trading Mesh

Searching for Handsome Returns – Can Turkey Still Deliver?

Tue, 22 Sep 2015 10:11:33 GMT           

Michael Ourabah, CEO, BSO Network Solutions

As is customary in the ongoing search for profit opportunities, high frequency traders often look to emerging markets to leverage a country’s surging growth. However, while returns can be attractively high, traders should always keep a wary eye on whether a fledgling economy risks taking a tumble, which could lead to gains being eroded in a short space of time.

Turkey has stood out among these emerging economies in recent years. In 2011, its GDP grew by 8.8%, while the previous year’s growth was an impressive 9.2%. However, just as the country appeared to secure its place as a stable location for investment, growth suddenly dropped. In 2014, it was just 2.9%. For a developed nation, this would be an acceptable figure, but in the world of emerging markets, the change in direction caused jitters in the trading community.

Political uncertainty in the region continues to lead some investors to look elsewhere, but according to CNBC, a recent report from The Organization for Economic Cooperation and Development actually projects Turkey’s GDP growth to increase gradually in 2015 and 2016. Therefore, despite trepidation, there is every reason to keep a watchful eye on developments occurring in the country.

It would be advisable to monitor economic reforms and the reaction of the national exchange before making either investment or technological decisions in Turkey. After all, the country is still determined in its mission to attract investor interest across the world. Furthermore, the national exchange is a good barometer; it has to position itself competently to remain competitive and this gives a strong indication as to the general health of the country’s markets.

Actions Speak Louder Than Words

The exchange in question, Borsa İstanbul, reflects a determination to establish Turkey as a global trading hub. To fulfil this objective, it underwent demutualization in 2012 and brought together all of Turkey’s capital markets in a single location. The message was clear: Borsa İstanbul had positioned itself clearly to provide global investors with simplified market access, better support for technology-driven strategies and more diversification options; it was also committed to supporting high frequency trading organisations.

Since the changes, high frequency traders have increasingly co-located their connectivity infrastructures within the exchange. Removing the need to link numerous locations together, which carries a cost burden, has made operations for firms much easier. Investors often respond positively to any exchange that helps them to improve their market through colocation and Turkey’s exchange is no exception.

This is helping to raise Turkey’s global financial positioning further. Investors are already aware that the city presents an attractive proposition because of its proximity to Europe, but Borsa İstanbul’s policies provide much valued data routing options for high-frequency traders keen to create low-latency trading portfolios. Globally focused exchanges are very attractive to trading firms, however we would always advise caution when approaching emerging markets. Turkey, like all emerging economies, is particularly susceptible to wider influences – there is no avoiding sudden downturns as proven by the events this summer. That said, there are still many reasons why Istanbul’s exchange offers investors a strategic advantage and with a measured plan supported by the appropriate market access technology, Istanbul could be holding the investment opportunities you’ve been searching for all this time.

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