How will Azerbaijani securities be traded in Turkey?

Azerbaijan and Turkey have reached an agreement on the integration of their operating systems, as a result of which securities listed on the Istanbul Stock Exchange (Borsa İstanbul) will be admitted to trading on the Baku Stock Exchange (BSE), and Azerbaijani securities will be traded on the Turkish stock market.

Expert-economist Jafar Ibrahimli told Report that trading in Azerbaijani securities in the Turkish market will attract more liquid funds to the country's capital market: “Integration has been discussed for quite a long time. Since the time when the capital market exists in Azerbaijan, that is, since 2008-2009, there has been cooperation with the Turkish market. Participants in the Turkish Stock Exchange and investment companies are shareholders of the Baku Stock Exchange.

The talk is about issues of mutual trade and storage (depository service) of securities of both public and private sectors of both countries. Since 2008-2009, Azerbaijani investors through Azerbaijani investment companies have been buying and selling shares of Turkish companies. Today, our investment companies can operate on the Istanbul Stock Exchange, any investor, who wants to buy securities in Turkey, can carry out this operation through local investment companies."

Jafar Ibrahimli said that Turkish investors have always shown interest in government securities in Azerbaijan: “Turkish investment companies have been investing in government securities of Azerbaijan for some time. But they did it in the Azerbaijani market. Now it will be possible on the Turkish market.”

Nariman Yagubov, deputy director of one of the country's investment companies, noted that the integration of securities of the two countries on their domestic exchanges is possible through cross-listing and depositary receipt mechanisms: “In international practice, there are cross-listing or depositary receipt mechanisms. In the first case, the company's shares must be listed in Turkey after listing in Azerbaijan. Cross-listing usually refers to stocks. Because bonds in 90% of cases are traded outside the exchange. As for the depositary receipt, the investment company buys shares in Turkey, then receives the receipt and lists it in Azerbaijan. The same mechanism can be applied in Turkey as well. This is an international mechanism and it can apply to both countries.”

“The main issue here is the integration of depositories, not exchanges. The main thing is that the securities stored in our country are recognized in Turkey, and the securities stored in Turkey are recognized by us. They should know our investors, and we should know theirs. Otherwise, a Turkish citizen will have to come to register with the depositary here. Selling bonds in Turkey is unpopular. They trade mainly in stocks. In practice, I have not seen local bonds in Turkey traded in foreign currency," Yagubov said.