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| Starting September 6 2012, the Tel Aviv Stock Exchange (TASE) will launch a new price monitoring mechanism to mitigate sharp volatility in prices of individual securities. The new mechanism is designed to safeguard the market against excessive price movements in individual securities. The new price monitoring mechanism is added to the current circuit breakers employed when the TA-25 index experiences sharp price fluctuations. With the introduction of the new mechanism, TASE aligns itself with leading securities exchanges around the world, which have already employed similar mechanisms.
The new price monitoring is based on a comparison between the next potential execution price and a reference price as stipulated below.
If an order was entered and the potential execution price breaches either the "dynamic" or the "static" threshold set for that security, trading in that security is suspended temporarily for 5-6 minutes. During this period, investors may cancel and/or update the order. At the end of the trading suspension, a multilateral auction is conducted, followed by continuous trading.
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| Two parameters are used in price monitoring– static and dynamic references: |
| The Static Reference is the anticipated price fluctuation relative to the price set in the last multilateral auction conducted for that security. If no multilateral auction was conducted (e.g. during the pre-opening phase) for the security, static reference is measured against the base price on that day.
Dynamic Reference is the anticipated price fluctuation relative to the price set in the last transaction.
During the Opening Auction, only the static reference is monitored, since dynamic reference is not applicable. In all other trading phases, anticipated price fluctuations are monitored against both static and dynamic references.
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| How price monitoring is employed during the various phases of trading |
| Opening Auction
For TA-25 shares (and these alone), fluctuations in the last theoretical price exceeding the predetermined threshold set for normal "Static Reference" will NOT trigger the price monitoring mechanism, but rather an "English Opening mechanism ", i.e., a 5-6 minute suspension in Opening Trading for the entire equities market. This mechanism will be triggered only for TA-25 shares and only during the Opening Trading phase.
For all non TA-25 shares, price monitoring will be triggered as described above.
When price monitoring is triggered, Opening Trading phase will be suspended for that individual security by 5-6 minutes. Following the first suspension, the last theoretical price for the security is rechecked. Should the fluctuation remain in breach of the static threshold, the Opening Auction will be postponed for an additional 5-6 minutes. After two such suspensions, Opening Trading is conducted in the security even if the anticipated fluctuation reflected in the theoretical price continues to breach the predetermined threshold
Continuous Trading Phase
During the Continuous Trading phase the system continuously tracks anticipated fluctuations resulting from the orders submitted.
If a limit order was submitted and the price tolerance thresholds ("Static Reference" and/or "Dynamic Reference") are breached, the following shall apply:
- the said transaction is not conducted and a 5-6 trading suspension is imposed;
- a multilateral auction is then conducted, during which time existing orders can be cancelled and new or revised orders submitted;
- The order triggering the price monitoring will be registered in the order book.
If, as a result of the submission of an order, several transactions, some of which fall within the normal static or dynamic reference thresholds, and some breach this threshold, the following shall apply:
- those orders that do not violate the tolerance thresholds are immediately executed;
- the violating order is not executed and the price monitoring is triggered;
- Orders that are not executed are registered in the order book and participate in the aforementioned multilateral auction, which is held following the 5-6 minute trading suspension.
Closing Trading Phase
This follows the same model as the opening auction. An additional price monitoring extension applies in the closing auction to ensure a high quality closing price. Following two such suspensions, Closing Trade is then conducted, regardless of the theoretical price.
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| Circumstances under which price monitoring is not employed |
| - on the first trading day of a security;
- on the first trading day when trading in the security is renewed after a suspension period of three months or more;
- the trading of warrants, options and rights;
- the trading of securities on the "illiquid securities" and "maintenance lists;
- during the multilateral auction conducted subsequent to any trading suspension;
- during the multilateral auction conducted within the framework of the Market Wide Circuit Breaker mechanism;
- On the trading day following a day in which a Market Wide Circuit Breaker was triggered and trading was not subsequently resumed on that same day.
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| Additional changes resulting from the new price monitoring mechanism |
| - Trading currently ends at 16:25, at the latest. However, in cases in which a price monitoring is triggered during the Closing Trading phase and trading is suspended for up to 12 minutes, trading will close at 16:37 at the latest. In these cases, derivatives trading will close at 16:40 – 10 minutes later than the current closing time. Derivatives trading will always close several minutes after trading in the underlying security closes.
- The duration of the random time range in the transition from one trading phase to another from now on will be a random one minute rather than the current duration of 5 minutes, Opening trade, for example will commence between 09:45-09:46.
- Trading suspensions ending at a random time will end at some point during the 45th minute of the suspension.
- The existing "exceptional order" mechanism will be discontinued.
- Trading in share options will be suspended when a price monitoring in the underlying share is triggered (except in cases in which price monitoring is triggered during the Opening Trading phase).
- It is now permissible to cancel orders, any time during the pre-opening phase.
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| Summary of price tolerance levels |
| Market
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Securities Group
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Static Volatility |
Dynamic Volatility |
Equities |
TA-25 |
6% |
3% |
TA-75 |
7% |
3% |
TA MidCap |
7% |
4% |
Small cap shares* |
12% |
10% |
Convertible bonds |
7% |
4% |
Market-linked Index products |
6% |
3% |
Bond |
Government bonds |
2% |
0.5% |
Corporate bonds |
4% |
2% |
Bond-linked Index products |
4% |
2% |
T-bills |
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0.5% |
0.1% |
*shares not included in the TASE Index Universe |
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| Regular Trading Times |
| Phase |
Equity Market |
Bond Market |
T-Bill and Institutional* |
Group A |
Group B |
Pre-opening |
09:00 |
09:00 |
09:00 |
09:00 |
Opening |
09:46 – 09:45 |
10:15 |
09:31 – 09:30 |
09:30 |
Pre-closing |
16:15 – 16:14 |
16:15 – 16:14 |
16:15 – 16:14 |
16:15 – 16:14 |
Closing |
16:25 – 16:24 |
16:25 – 16:24 |
16:25 – 16:24 |
16:25 – 16:24 |
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| * "Institutional" refers to securities privately placed with institutional investors, which trade on a dedicated platform designated solely for these investors rather than for the public at large.
Group A - shares included in the TA-100, Tel Tech-15, Tel Div-20, TA Real Estate-15, TA Finance-15, TA-Maala indices, ETNs, closed-end mutual funds which track the TA-25, TA-75, TA-100, TA-Banks, TelTech-15, TA Div-20, TA Real Estate-15, TA-Finance 15 or TA Maala indices.
Group B - Mid and small-cap shares and convertible securities.
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