At this point, let me clarify certain points with regards to the floating exchange rate regime, which has been implemented in Turkey since 2001 and in almost eighty countries all over the world up to now. This has to do with the exchange rate being among the first contracts to be operative in the Turkish Derivatives Exchange, as well as its significance within the context of risk management, which is the primary function of derivatives markets. As we have emphasized at all times since the first day of the floating exchange rate regime in Turkey, under this regime exchange rates are determined by supply and demand conditions. The level of the exchange rate is shaped by economic developments, external shocks, and expectations and fluctuations in the risk premium are applicable to all of them. Neither the Central Bank nor any other authority has any commitment or target whatsoever as regards the level of exchange rate. 3  Bank for International Settlements (2004), “Triennial Central Bank Survey of Foreign Exchange and Derivatives Market Activity in April 2004”. 4  Chinese proverb. 4  BIS Review 17/2005  At this point, I would like to underline two points missed by those who held the opinion from the start that the floating exchange rate regime could not be implemented in Turkey, as the risk in this regime was too high, there would be too much volatility in the foreign exchange markets, and the economy, especially the foreign trade would be adversely affected as a result of these.
But the world of finance is moving forward not only in the realms of such highly complex or sometimes - dare one say - gimmicky instruments. Continuous change and innovation are observable at the more prosaic level too. Looking at Hong Kong alone, over the past year there has been an impressive list of innovations, actual or planned, in the financial sector. These are not necessarily all of specific interest to the corporate treasurer but are nonetheless significant in a more general context. Thus, first, we have established a reciprocal link with South Korea for access to each other’s bond settlement and custody systems (following earlier links of this sort with Australia and New Zealand). Next, Hong Kong has launched the Tracker Fund as a means of disposing of part of the Exchange Fund’s Hong Kong dollar equity portfolio; although this bears many characteristics of a conventional index-tracking unit trust, it also has some unique innovative features. In addition, the Hong Kong Mortgage Corporation has successfully introduced its first mortgage-backed securities programme. And notes issued by HKMA and HKMC have been listed on the stock exchange for the first time. Finally, we are preparing a US dollar clearing system which we hope will offer a wider range of facilities than any other offshore clearing; I would not want today to anticipate the more detailed announcements about the planned timetable for this project, which we expect to make shortly. The foregoing is not necessarily an exhaustive list of changes which are being implemented here.