As the Central Securities Depository and Trade Repository of the Turkish Capital Markets, Merkezi Kayıt Kuruluşu A.Ş. (MKK) provides it members with Depository, Data, Corporate Governance and Investor Services. MKK also offers in-house developed data and technology systems and platforms to local and foreign capital and financial markets as part of its role as an R&D center.
Securities Held in Dematerialized Form at MKK:
- Equities (Listed at the Borsa Istanbul)
- Mutual Funds
- Exchange Traded Funds (ETF)
- Corporate Bonds
- Commercial Papers
- Bank Bills
- Corporate Warrants
- Covered Bonds
- Asset-Backed Securities
- Government Debt Securities (Investor Holdings)
- Government Lease Certificates
- Private Sector Lease Certificates
- Electronic Warehouse Receipt
- Real Estate Certificates
- Gold Backed Lease Certificates
- Gold Backed Bonds
- Convertible Bonds
- Foreign Exchange Government Certificates
- Foreign Exchange Government Bonds
Depository Services of MKK:
- Investment/Custody Account services
- Issuer, securities issue and corporate actions services,
- Safekeeping of securities on beneficial owner basis and omnibus accounts
- Settlement services for dematerialized securities,
- SWIFT services,
- Services related to the transactions on the Securities Lending Market and the Electronic Fund Trading Platform of Türkiye
- Services for Electronic Warehouse Receipts
- Services for Crowdfunding Platforms
MKK Data and Technology Services:
MKK provides in-house developed data and technology systems and platforms to local and foreign capital and financial markets with its R&D license;
- e-YATIRIMCI: Investor Information Center
- e-GENEL KURUL: Electronic General Meeting System
- e-ŞİRKET: Companies Information Portal
- e-ÜRÜN: Electronic Registry Center
- e-VEDO: Electronic Trade Repository Platform
- e-VERİ: Capital Markets Data Bank
- e-YBS: Investor Notification Service (formerly known as e-CAS)
- e-YKS⁺: Electronic Board of Directors System
- VAP: Data Analysis Platform
- YRTS: Investor Risk Monitoring System
MKK is also the operator of the Public Disclosure Platform (KAP), an electronic system that facilitates the electronic delivery and disclosure of all matters requiring public disclosure as per the Capital Market Law and Stock Exchange regulations.
What is a “Central Securities Depository Institution”?
Central Securities Depositories are among the most important post-trade institutions in capital markets. A Central Securities Depository (CSD) is an institution conducting at least one of the following activities; operating a Security Settlement System (SSS), performing first registry of securities (issue) (notary service) and holding securities accounts centrally at the highest level (central maintenance service).
Securities Settlement System is defined as a system in which securities transfer instructions are executed as per the EU Settlement Finality Directive numbered 98/26; article 2, section “i”, subsection 2. The core component of central depository function is to operate a central system, in which securities are issued, held in accounts either at participant or beneficial owner basis, traded, and their respective rights are installed.
MKK is a central institution that its responsibilities of issuing capital market instruments in dematerialized form, registering them in accounts opened at beneficial owner basis, monitoring their respective rights are given by law and the records kept in its books on these securities are legally binding. In other words, it is a central system which securities are issued, held in beneficial owner accounts, transferred and their respective rights are installed. Therefore, MKK with its current structure is the Central Securities Depository institution of Türkiye.
History of Central Securities Depositories in Türkiye
The ISE Settlement and Custody, Inc., which was established by the ISE in 1992, was the authorized central settlement and depository institution conducting settlement of transactions in cash and securities on the ISE markets. In Türkiye, until 1995, Takasbank physically held stocks of listed companies in its vaults on a participant based immobilized system. After the financial crisis in 1994, as a result of the bankruptcy of some financial intermediaries, the ISE Settlement and Custody, Inc. was entrusted with the establishment of an investor (beneficiary owner) based immobilized system with respect to the Capital Markets Board (CMB) decree on 15 December 1994. The ISE Settlement and Custody, Inc. changed its name to the ISE Settlement and Custody Bank, Inc. (Takasbank) by receiving an investment banking license in 1997. During this period, stock certificates were continued to be physically issued and new certificates were printed for capital increases. However, publicly traded stocks of the ISE listed companies were immobilized at Takasbank first on a participant then on an investor basis. Therefore, the traditional valuable papers law and the physical system still existed legally for stocks and Takasbank continued its tasks accordingly until 28 November 2005.
Transition to the Dematerialised System and the Dematerialised System Law
The first step of the dematerialization reform for capital markets was taken with the addition of the Article 10/A to the Capital Market Law (CML). The Article 10/A of the (CML) brought about a significant change by annulling the former valuable papers law that was based on the physical certificates and introducing the legal framework for the dematerialized system in which Central Registry Agency Inc. (MKK) holds capital markets instruments and investor rights affixed on them in an electronic book keeping environment. MKK was founded in 2001 as the most important part of this reform.
The dematerialization process was started with mutual funds in April 2005, and on 28 November 2005 all publicly traded stocks on the ISE were fully dematerialized. Since 2005, all of the new capital market instruments have been issued in fully dematerialized form.
- The immobilized depository system that Takasbank continued to manage until 28 November 2005 was based on a CMB resolution, and our law did not attribute any legal impact concerning records held at Takasbank. In the physical system physical certificates constitute the legal basis whereas in the dematerialized system records held at MKK are deemed to constitute the legal basis. The Article 10/A of the CML removed the need for issuance of physical certificates on those securities and rights affixed on them that are deemed to be dematerialized by the CMB. Therefore, the former valuable papers system was discontinued for the new valuable rights system.
- The dematerialized system is a completely new legal discipline. The new system according to the Article 10/A introduced holding of shares and rights in an electronic environment by eliminating physical shares, and thus, eliminating the legal nature of the valuable paper. In this new system rights are entirely separated from papers. The dematerialized system removes many legal principles based on the valuable papers law. Besides bringing along new institutions the dematerialized system changed the legal nature of real rights to be established on shares.
- In the physical system that continued until 28 November 2005 only stocks that were traded on the ISE were physically held in Takasbank vaults. In the dematerialised system total capital, including all non-floating shares, are held in dematerialised form.
- At present all floating and non-floating shares of publicly traded companies, mutual funds, corporate bonds, commercial papers, warrants, covered bonds and asset backed securities are issued and held in MKK’s electronic book-keeping system. Rights affixed on all dematerialised securities are reflected to MKK records and these records bear legal basis. In this regard, Takasbank’s functions before the transition to the dematerialised system and the functions attributed to MKK by the relevant regulations concerning the dematerialised system are entirely different. MKK is not a depository institution which holds physically issued stocks in global form as Takasbank did. MKK is a central depository institution where capital market instruments and the rights on them are held in dematerialised form, and whose records are attributed legal basis as per the depository functions assumed from the law. MKK has assumed all the functions of a Central Securities Depository (CSD) in this structure.
- It can clearly be observed from the relevant regulations concerning the dematerialised system that the legislators concede legal basis to MKK records. The records created at MKK do not carry an organic but a declaratory status as claims made to third parties in connection with rights affixed on any dematerialised capital market instrument are based on the date of notification made by participants to MKK. It is not obligatory to carry out bilateral transactions on capital market instruments that are held at MKK through MKK for those transactions to be effectual for the parties. However, any notification that is made to MKK through the CDS renders a transaciton the ability to be claimed against third parties. Therefore, as per the Article 10/A of the CML, it has been acknowledged that the notification (date) made to MKK has a legal basis in right entitlements due to transactions in capital market instruments. Another novelty brought about by the Article 10/A is that, in registering the transfer of shares to their books, issuers can take the records at MKK as basis without the need for any documentary proof. MKK assumes a function with regard to the assessment of an investor’s status against issuers besides acting as the Central Securities Depository. This function is defined as the “registry” function in international post-trade industry. MKK has provided an efficiency by combining the Central Securities Depository (CSD) function with the Registrar function. In this context, the legal nature of the records held at MKK involves Registry functions beyond its CSD functions.
- The legal basis of the records held at MKK is further emphasised in the new Turkish Commercial Code which was adopted on 13 January 2011. By the Article no. 496 of the new Commercial Code it was decreed that in case the registered shares that are listed are sold on exchange, MKK will notify the companies about the identification of the transferor and the number of shares sold or will provide technical access to this information for those companies. Furthermore, the Articles no. 415-417 and 431 of the new Commercial Code, which regulates the procedures and principles of convening of general assemblies of joint stock companies, decrees that the list of participants to general assembly meetings shall be prepared according to the list of shareholders that will be received from MKK.
- The dematerialised system, which is primarily based on trust instead of documentary proof of right entitlements, cannot be insured in whole, and the inherent risks associated with this system cannot be covered by capital alone as the system carries substantial risks that cannot be fully indemnified. Therefore, by the Article no. 5 of the MKK regulation which was issued by the Council of Ministers, it was decreed that the CMB should appoint a member to the MKK board to act as the chairman of the board, through whom the CMB could effectively exercise its supervisory and regulatory roles. Furthermore, the Article no. 9 of the MKK regulation brings about additional requirements for the members of the MKK board of directors and its auditing board, and the MKK staff, preventing the hiring of personnel who were condemned of some specific criminal offenses.
- Another consequence of this is the management of the Investors Protection Fund by MKK.
Financial Accounts Center
MKK, was included to the integrated system which was established between Takasbank and the Turkish Derivatives Exchange (Turdex) for risk management purposes on a participant basis as the “Financial Accounts Center” in 2011. The CMB designated MKK as the “Financial Accounts Center” to enable assignment of unique registry numbers to investors for their transactions in different financial markets. In this respect, accounts that are opened with Takasbank for transactions on Turdex will be initially opened with MKK and the related arrangements that will enable assignment of unique registry numbers will be made by the two institutions. In this way, MKK has become the “Financial Accounts Center” of Türkiye.
System Integrations
MKK, within the relevant legislative framework, shares data in the Central Dematerialised System on dematerialised capital market instruments with regulatory and supervisory authorities, settlement and custody institutions, exchanges, professional organisations, data vendors, issuer companies, investors and public in general. Data sharing is performed hourly, daily, weekly, monthly, quarterly and annually. The following institutions are among the organisations that MKK shares data with:
- Capital Markets Board of Türkiye
- Banking Regulation and Supervision Agency
- Financial Crimes Investigation Board
- Central Bank of Türkiye
- Istanbul Stock Exchange
- Takasbank-ISE Settlement and Custody Bank Inc.
- The Association of Capital Market Intermediary Institutions of Türkiye
- Governorships
- Data Vendors
MKK, provides continuous data flow to the “CMB-ISE Surveillance Project” which was started to fulfil a surveillance function for the Turkish capital markets.
MKK also enables MKK members, within the designations of the Capital Markets Board of Türkiye, to enter the following information to the Central Dematerialised System:
- Information on free-floating shares
- Mutual Funds Management Fees
- Information on account proxies
- List of insiders
International Relations
Beginning from its establishment, MKK has developed an efficient communication and business network in international capital and financial markets; strengthening its brand image and brand positioning.
As the Central Securities Depository and Financial Accounts Center of Türkiye, MKK is the primary source of information in Turkish capital markets. Concentrating its services on four main pillars (depository, trade repository and reporting, corporate governance and investor), MKK also contributes to further development of local and international capital markets with the products and services developed within its R&D center.
With its technology, extensive knowledge and deep experience, MKK is among the leading CSDs in termes of cooperation and collaboration agreements Memorandum of Understanding (MoUs), signed with foreign CSDs. As of today, MKK is in formal contact with over 20 CSDs throughout the world. Actively participating in working groups and conferences organized by major CSD Associations, ECSDA, AECSD, AMEDA, WFC and ISSA, MKK is amongst the several CSDs that active membership in these regional CSD associations.
- MKK is a member of European Central Securities Depositories Association (ECSDA) and International Securities Services Association (ISSA) since 2006.
- MKK became a member of The Africa & Middle East Depositories Association (AMEDA) in 2014
- MKK is a member of The Association of Eurasion Central Securities Depositories (AECSD) since 2015
In recent years, MKK's global reach expanded dramatically. Becoming a member of OeKB (2010), MKK signed a sales agreement with Africlear Global (2016) for the use of the electronic general meeting system (e-GENEL KURUL) in Kenya and Nigeria, followed by another sales agreement for e-GENEL KURUL signed with the Indonesia CSD - KSEI (2017). With the direct link established with Euroclear Bank, MKK's global reach peaked. As its first foreign CSD member, Euroclear Bank provides direct access to Turkish capital markets for its clients; Euroclear Bank has direct and indirect links with over 55 countries. In addition to Euroclear Bank, MKK concentrated its efforts to onboard new FCSDs in the coming years.
Following the first foreign central securities depository link established with Euroclear Bank's MKK membership,the National Deposit Center (MDM) of Azerbaijan became a member of MKK in 2021. Through the MDM omnibus account opened at MKK, investment institutions and investors from Azerbaijan now have the opportunity to directly perform their clearing and custody operations regarding Turkish government debt securities.
