In March 2008, Prof. Zohar Goshen, Chairman of the ISA, with the aim of enabling the introduction of Israeli ETFs, lead an initiative to transfer the regulatory regime governing ETNs from one based solely on full disclosure to one based on substantive regulation, such as that governing the mutual fund industry. In August of that year, he and TASE Chairman, Shaul Bronfeld, appointed a committee to examine avenues to bring this about. It is estimated that the new Israeli ETFs will hit the market some time in the second half of 2010.
Characteristics and Operation of ETF Trading | |
The trading of ETF units will commence the day following their offering and will be traded in a manner similar to ETN trading. Existing open-end tracker mutual funds will be entitled to convert themselves into ETFs. ETFs which fail to attract a minimum threshold investment within a designated period of time will be delisted and converted into conventional mutual funds. The ETF issuer will serve as market-maker, providing liquidity for ETF units by quoting prices according to rules stipulated in the legislation. The ETF managers’ market activity will be translated into the creation and redemption of ETF units. Unit sales by ETF managers during trading will create new units, while the purchase of units from the public will culminate in cancellation of the units. The rules governing the market activities of ETF managers will be designed to ensure the interests of ETF unit-holders, including rights to revenues which may cause the ETF to out-perform the tracked asset. In order to ascertain transaction prices and facilitate timely coverage, ETF manager will be entitled to trade in ETF units only during the continuous trading phase (in which bilateral trade is conducted) and only on days on which the ETF’s net asset value can be calculated. In addition to market making activity, TASE will conduct ‘regular’ trading in EFT units, even on those days on which market-making is not allowed. In addition, unit-holders will be entitled to redeem their units directly from the ETF manager (as is the practice regarding Israeli ETNs), according to the ETF’s net asset value at time of redemption. |
Preparations for ETF launch | |||||||||||||||||||||||||||||||||||||
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