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Tel Aviv Stock Exchange approves ETN regulations


The Tel Aviv Stock Exchange has approved additional regulations for the exchange-traded notes market, which are designed to better address investor needs while maintaining fair and orderly trade.

The key additions to the regulations are:

1. Criteria for indices eligible to serve as ETN underlying assets:
– The value of the public float of a local share index serving as the underlying asset for an ETN shall not be less than NIS7bn and of a bond index shall not be less than NIS3bn.
– A local share index shall solely include shares included in the index universe or shares for which the public float is at least NIS75m and constitutes at least 10 per cent of shareholders equity. For local bond indices, all bond series represented in the index must have a market value of at least NIS200m.
– The weight of a single security in a local index shall not exceed 20 per cent.
– Requirements shall be placed on local and foreign index vendors regarding their experience in creating and calculating indices and on the seniority of the index and its publication.

2. Traded Depository Notes
From this day forward the listing rules governing ETNs will apply to exchange-traded depository notes as well. Until now these instruments were listed under the listing rules set for corporate bonds.

3. Leveraged without rebalancing ETNs
At the same board meeting, the board of directors set restrictions on the maximum leverage used in leveraged "without rebalancing" ETNs, as follows:
–  On the TA-25 and foreign indices (which include TASE-traded shares): long ETNs – three times the underlying index; short (inverse) ETNs – two times the underlying index.
– For all other local indices – two times the underlying index.
– For foreign indices which do not include TASE-traded shares: three times the index for both long and short ETNs.

Within the framework of the revised regulations, the TASE board will be authorised to suspend trading or delist ETNs, should orderly trade in either an ETN or an underlying index be disrupted. In such cases the ETN issuer will be required to exercise early redemption of the ETN within 30 days.

It is anticipated that proposals enabling monthly rebalancing of leveraged ETNs on the TA-25 index and setting rules for the approval of daily rebalanced leveraged ETNs on foreign indices will be brought before the board in the near future.

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