The Tel Aviv Stock Exchange (TASE) continues its efforts to revive trading volumes. On Thursday, the TASE board approved the launch of derivatives (options and futures contracts) on the Tel Aviv 100 Index. The new derivative instruments join existing ones on several underlying assets: the Tel Aviv 25 Index, the Tel Aviv Banking Index, the shekel-dollar exchange rate, the shekel-euro exchange rate, and Tel Aviv 25 Index stocks.
The derivatives on the Tel Aviv 100 Index will start to be traded on Thursday, January 29 2015.
The TASE cited the following factors as reasons for the introduction of derivatives on the Tel Aviv 100 Index:
- The Tel Aviv 100 Index is considered to be the best benchmark of the Israeli economy, particularly by foreign investors. Derivatives on this index will contribute to attracting new investors and will thus lead to greater liquidity and tradability for Tel Aviv 75 Index stocks.
- The value of the public's holdings in ETFs tracking the Tel Aviv 100 Index has grown substantially in the past decade, and currently stands at some NIS 14 billion. Derivatives on the Tel Aviv 100 Index will enable ETF managers and mutual fund managers to hedge exposure to the index.
- The new derivatives will provide institutional investors with an additional investment tool.
- The high correlation between the Tel Aviv 25 Index and the Tel Aviv 100 Index will enable derivatives players to hedge exposure to derivatives on the Tel Aviv 100 Index with derivatives on the Tel Aviv 25 Index. This fact will contribute substantially to ensuring liquidity in the new derivatives.
The new derivatives will be identical in their characteristics to those on the Tel Aviv 25 Index, which is to say that multiples of the underlying asset will be 100, options will be European style, the length of the derivatives will be one month, two months, and three months, and clearance and the determining index level for exercise and expiry will be on the Thursday before the last Friday of the exercise month.
The limit on open positions will be 30,000, the same as the limit on Tel Aviv 25 Index derivatives. In order to ensure adequate liquidity from the start of trading in the new derivatives, the TASE will not charge trading commissions on them for the first three months, and will take steps to bring market makers into trading.
TASE senior VP and head of the Trading and Derivatives Department Roby Goldenberg said, "Launching derivatives on the Tel Aviv 100 Index is a significant step in the expansion of the range of derivatives traded on the stock exchange. The new derivatives will contribute to making trading more sophisticated, will improve liquidity in all stocks in the Tel Aviv 100 Index, and boost trading volumes in stocks and derivatives. Since the Tel Aviv 100 Index is perceived as representative of the Israeli economy, particularly by foreign investors, the new derivatives will make investment in the Tel Aviv Stock Exchange more attractive to these investors as well."
Published by Globes [online], Israel business news - www.globes-online.com - on October 5, 2014
© Copyright of Globes Publisher Itonut (1983) Ltd. 2014