• Turkish regulators are preparing to end a sweeping ban on short-selling equities, a measure originally imposed to curb market volatility.
  • The ban, currently in effect until at least August 29, 2025, has been a cornerstone of the government's strategy to stabilize the Borsa Istanbul.
  • The anticipated policy reversal signals growing confidence in market stability but risks reintroducing speculative pressure amid persistent inflation and a weak lira.

Turkey’s Capital Markets Board (CMB) is set to allow investors to short-sell stocks again, according to people familiar with the matter, marking a significant shift away from the emergency measures that have defined the country’s financial market policy for over two years. The ban, which prohibits betting on falling share prices, was last extended in July and is officially scheduled to remain until August 29, though officials are now moving to scrap it earlier.

The original ban was first instituted in February 2023 following severe market disruptions after a devastating earthquake. It was briefly lifted for large-cap stocks on the BIST 50 index at the start of 2025, but was hastily reinstated across the board by March amid a fresh wave of volatility, a sharp depreciation of the Turkish lira, and heightened geopolitical tensions. The CMB’s efforts to stabilize markets during what it termed “speculative attacks” have also included loosening restrictions on corporate share buybacks and relaxing credit margin requirements to encourage companies to support their own share prices.

This potential policy unwind comes as the administration attempts to project economic normalization following a stark pivot to orthodox monetary policy. The central bank has aggressively raised interest rates to combat inflation that remains officially above 60%, contributing to a deep cost-of-living crisis. Yet, markets remain wary. The detention and pending trial of Istanbul’s mayor earlier this year sparked asset sell-offs and raised concerns about judicial independence, illustrating how political tensions continue to feed into market instability.

“The ban was always intended as a temporary circuit breaker,” said one banking official, who asked not to be identified discussing regulatory matters. “The view now is that the underlying conditions have improved enough to manage without it.” Efforts to reach the CMB for official comment were not immediately successful.

For international asset managers, the ban has been a significant impediment, limiting investment strategies and contributing to a perception of regulatory unpredictability that has deterred foreign capital. Its removal would be a welcome step towards market efficiency, though analysts caution that the underlying fragility hasn't fully abated. Without the ban, markets could see increased volatility, testing the resilience of recent gains. The situation continues to evolve, and further regulatory interventions remain possible if economic and political stress persist.