"Turkey’s forex market in agony after drastic measures"

From al-Monitor:

Foreign exchange (forex) trading in Turkey, launched officially in 2011, is relatively unfamiliar to Turks, which is why training courses and seminars are being organized for aspiring investors. Eager to make quick money, thousands of neophytes lost big in leveraged transactions on the forex market in recent years as they virtually bet on whether foreign exchange and gold prices would rise or fall. Some lost cars and homes used as starting capital; others lost their entire fortune.

As explained in March in Al-Monitor, the main attraction factor here was the leverage ratio, which stood as high as 100:1 until February, meaning that investors were able to trade in sums 100 times larger than what they had deposited. The ratio promised big earnings, but for the unversed investor, it often meant huge losses, and the market came to resemble a casino.

As the outcry grew, victims of the forex fever came together in online platforms and their grievances reached the parliament’s Petition Commission and the government. The Capital Markets Board (SPK) took action Feb. 10, lowering the leverage ratio to 10:1 and setting a minimum deposit of 50,000 Turkish liras (about $14,000).

Yet pushing on the brakes so hard sent the forex market into shock. As the trade volume nose-dived, many brokerage houses shut up shop. Foreign firms began to exit Turkey or lay off staff. Most recently, in early July, Saxo Bank Forex closed its Turkey offices, following in the steps of XTB. Major local companies such as Referans Menkul Degerler, Ekspres Yatirim, ATIG Forex and Destek Yatirim Menkul Degerler also ended their operations.

SPK head Vahdettin Ertas said last week that the daily trade volume on the forex market had fallen from 44 billion liras ($12.4 billion) to about $10 billion liras ($2.8 billion) since the ratio revision. The number of investors, meanwhile, fell from about 21,500 to some 6,500, he said.

The huge contraction in the trade volume — nearly 80% — speaks in itself to the severity of the shock. High-ratio “addicts,” however, found a way to circumvent the new regulations. The SPK’s February decision did not restrict Turks from engaging in forex transactions abroad, which led those ready to take risks to turn overseas, either online or via foreign brokerage houses....MUCH MORE