New Leveraged ETN Regulations

Press Release

10/12/2012

The Tel Aviv Stock Exchange (TASE) Board of Directors approved revised regulations for listing rebalanced leveraged ETNs. It is anticipated that this measure, which was outlined in the Israel Securities Authority (ISA) "roadmap", will contribute to the development of Israel's ETN market and will substantially lower management fees charged by ETN issuers.

ISA Chairman, Prof. Shmuel Hauser: "Leveraged ETN will help enhance the array of exchange-traded products, increase competition, improve TASE trading and lower costs for investors".

At its Thursday (6 December 2012) meeting, the Tel Aviv Stock Exchange (TASE) Board of Directors approved revisions to listing regulations for leveraged ETNs.

These regulations follow an amendment approved by the TASE Board last June, which set rules regarding indices that can serve as underlying assets for ETNs as well as listing rules for leveraged ETNs, which do not engage in periodic asset rebalancing.

The ISA, TASE and leveraged ETN issuers formulated new rules designed to prevent impairments to orderly trade. These have been approved by the TASE Board and are pending ISA approval, after which time the temporary TASE regulations will be submitted to the Minister of Finance and the Knesset Finance Committee.



	Highlights of the new regulations for leveraged ETNs on the TA-25 include: Issuers may issue only monthly-rebalanced ETNs. Monthly rebalancing will be permitted under certain conditions, such as: the degree of leverage (long – up to 3 times; short – up to 2 times); transactions designed to maintain the leverage solely through the purchase and sale of TA-25 index options (and not shares); the monthly rebalancing is executed on the day preceding TA-25 option expiration. The scope of leveraged ETNs will be limited to NIS 350 million for each investment house The TASE Board of Directors will be entitled to delist an ETN should it be necessary to maintain orderly trade.



	ISA Chairman, Prof. Shmuel Hauser remarked: "Opening the leveraged ETN market is part of the ISA's "roadmap". Discontinuation of the current exclusivity held by a single leveraged ETN issuer will help enhance the array of exchange-traded products, increase competition, improve TASE trading and lower costs for investors". TASE Chairman, Saul Bronfeld: "The rules formulated by the ISA and TASE constitute a golden path, which will allow investors to purchase leveraged ETNs from a variety of issuers without letting the activity of ETN issuers compromise orderly trade."