The Tel-Aviv Stock Exchange announced that it would launch options and futures contracts on the shekel-euro exchange rate on Wednesday, November 28. "The TASE decided to launch the new product because institutional and retail investors have expressed strong interest in purchasing an efficient and low-cost hedge against the fluctuations of the euro against the shekel," said Dror Shalit, TASE's SVP for trading and clearing.
The euro derivatives join the TASE's active market for shekel-dollar options. In October, the daily trading volume of the dollar options on the Tel Aviv Exchange averaged 32,000 options; in September daily volume averaged 46,000 options. The record daily volume for the dollar options, 83,000, was set on September 11. The size of a shekel-dollar option is 10,000 U.S. dollars.
The new product was introduced at a special conference of the Maof Club, sponsored by the TASE, last week in Tel Aviv. Barry Topf, director of the Foreign-Exchange Department at the Bank of Israel, said at the conference, that 22% of the State of Israel's foreign trade in 2000 was conducted in euro. About 13% of the currency conversions in Israel were conducted in currencies other than dollars. The Bank of Israel estimates that the majority of those conversions were conducted in euro. Topf added that derivatives trading also would help strengthen the local currency market.
Dr. Eyal Inbar, Economic Officer in the European Commission Delegation to Israel, said that about 41% of the total imports into Israel originate in the European Union countries and that the EU receives some 32% of Israel's exports.
"From Israel's point of view, the introduction of the euro presents an opportunity and a challenge from the European Union: Israel's main trading partner. The expected growth in demand within the EU and the use of a single currency open an important window of opportunity. At the same time, the sharpening of competition within the EU, both from European companies and from foreign companies that export to the EU, will obligate Israeli exporters to adapt accordingly."
Inbar believes that proper preparation will help Israel to contend with the "euro challenge" and to transform the introduction of the new European currency into an engine for success.
Published by Israel's Business Arena on November 15, 2001.