Starting Today - The Settlement Price in Derivatives Will be Determined at the End of Every Trading Day, Based on Current Market Data or a Theoretical Calculation, to Reflect[...]

Tel Aviv, January 16, 2022 - Starting today, the calculation of the settlement price for derivatives traded on TASE will be aligned with international standards, whereby, at the end of each trading day, a price that reflects the economic value will be determined for every derivative. If transactions or price quotes that meet the stipulated criteria are available for the derivative, the settlement price will be based on those. If such transactions or price quotes are not available for the derivative, TASE will calculate and publish a theoretical settlement price for such derivative.

This change is intended to align the method of calculation of the settlement price for derivatives with that applied to derivatives in stock exchanges globally. That is, where current market data is not available, the settlement price will be calculated based on the theoretical value of the derivative.

The settlement price calculation for options will be based, to the extent possible, on market data, i.e., transaction prices or buy and sell quotes in the orders book shortly before the end of trading. In the event that market data (transactions or quotes) is unavailable or is not current, the settlement price will be determined based on the theoretical value of the derivative - PCP model or theoretical value under the B&S formula, combined with data from a model that is used to establish a volatility surface.

The settlement price for futures will be calculated based on the forward price formula applicable to the underlying assets.

The transition to the new method of calculation of the settlement price for derivatives is beneficial to all parties in the capital market: fund managers will no longer need to revaluate illiquid derivatives on the basis of an internal model, but will use the daily settlement price calculated and published by TASE, which will serve as a benchmark for all parties in the capital market; TASE members will be able to better monitor investment portfolios containing derivatives, this on the basis of a more accurate daily gain/loss; and the investors will enjoy the improved comparability of the returns achieved by the various managers on investment portfolios containing derivatives. The change also addresses the needs of the institutional investors and is expected to increase their involvement in the derivatives market.
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