Foreign Exchange-Traded Fund
Due to Amendment 23 of the Joint Investment Trust Law – 1994, which came into effect in February 2006, the Israel Securities Authority (ISA) established regulations enabling for the first time the marketing and distribution of foreign funds in Israel.
An exchange-traded foreign fund is an exchange-traded fund (ETF) issued by a foreign issuer, the manager of which, having received a permit from the ISA to market and distribute foreign funds in Israel, applied to the Tel Aviv Stock Exchange (TASE) to list them on the exchange and was duly approved by TASE to do so.
One of the criteria for listing a foreign fund on TASE is a requirement, which states that the fund must trade at least 12 months prior to the listing on TASE as an exchange recognized in Israel for dual listing (under the Second and Third Schedules of Israel’s Securities Law- 1968). In case the units of the foreign fund will delisted abroad, they will be automatically delisted from TASE as well.
The assets tracked by foreign exchange-traded funds can be foreign equity or bond indices, commodities or Futures.
Like local ETFs, foreign funds are traded in either the stock or the bond market, according to the asset tracked by the fund.
Trading in foreign funds on TASE will be conducted Mondays through Thursdays, in NIS (New Israeli Shekel).
Trading will not take place on Sundays.
The rules governing the listing of foreign exchange-traded funds are identical to those governing the listing of local ETFs, mutatis mutandis.
In order to issue a foreign exchange-traded fund on TASE, the fund must comply with the Joint Investment Trust Regulations (see link below to the ISA website) as well as the TASE listing rules.
Foreign funds eligible for trading on TASE must meet the following criteria, under rules to be published by the ISA:
- The total value of assets under management in funds and in client portfolios by the foreign fund manager is at least equivalent to US $20 billion.
- The foreign fund manager manages at five foreign funds, the units of which are offered to the public for a period at least five years and the total value of assets held in each one of the funds is no less than US $500 million.
- The net asset value of the foreign fund on the eve of the application is US$ 50 million and its units are offered for sale in a European country or in the U.S. for a period no shorter than 12 months prior to the beginning of their public offering in Israel.
- The foreign fund operates under EU regulation (UCITS) of the U.S. Investment Company Act of 1940.
- The fund is listed on one of the foreign securities exchanges stipulated in the Second and Third Schedules of Israel Securities Law-1968.