The Tel Aviv Stock Exchange (TASE) Board of Directors approved the launch of derivatives (options and futures) on the TA-100 index. The new derivatives join existing products on a number of underlying assets – the TA-25 index, the TA-Banks index, the ILS/USD exchange rate, the ILS/Euro exchange rate, and 10 individual stocks included in the TA-100 index.
The derivatives on the TA-100 index are scheduled to begin trading on Thursday, 29 January 2015.
The decision to launch derivatives on the TA-100 index was based on the following considerations:
- The TA-100 index is considered to be the best benchmark of the Israeli economy, particularly by foreign investors. Derivatives on this index can help attract new investors by providing new alternatives for managing investment in a broader based Israeli market index.
- The market cap of ETNs tracking the TA-100 index has grown significantly over the past decade and total asset value currently stands at USD 3.8 billion. Derivatives on the TA-100 index will enable ETN managers, as well as the managers of mutual funds tracking the TA-100 index to more effectively manage their exposure to the index.
- Institutional investors gain exposure to the TA-100 through investments in ETNs or in shares included in the index. The launch of derivatives on the TA-100 index will diversify their hedging opportunities
- The high correlation between the TA-25 and TA-100 indices enable investors in the derivatives market to hedge activity in TA-100 derivatives against activity in TA-25 index derivatives.
For these reasons it is anticipated that the introduction of TA-100 derivatives will contribute to the liquidity of both the derivatives market and underlying spot markets.
The specifications of the new derivatives will be similar to those of derivatives on the TA-25 index:
- Contract multiplier – 100.
- Type of option – European.
- Contract months – one, two and three months.
- Final settlement price – Opening index on the Thursday preceding the last Friday of the month of expiration (simultaneously with the expiration of monthly TA-25 derivatives and stock options).
- Settlement – cash
In order to ensure adequate liquidity starting from the first day the new derivatives are traded, TASE will waive trading fees on these derivatives for the first three months and will endeavor to enlist market makers for these new products.
Robby Goldenberg, Senior VP and Head of the Trading, Derivatives & Indices Department stated: “The launch of derivatives on the TA-100 index constitutes a significant step towards expanding the variety of derivatives traded on TASE. It is anticipated that the new derivatives will contribute to market efficiency, to the liquidity of all TA-100 constituent shares and to the growth of the trading volume of TASE’s stock and derivatives markets alike. Since the TA-100 index is perceived as best representing the Israeli economy, especially among foreign investors, the new derivatives will likely increase the attraction of investing in TASE for these investors as well.”
