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Press Release |
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| | January 07, 2008 |
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The TASE will implement a new procedure to reduce volatility in the Opening Phase |
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Its aim is to extend the pre-opening phase by a few minutes, if the change in the TA-25 index (upwards or downwards) is expected to be larger than 2.5% |
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The TASE Board of Directors has decided on a further improvement, whose goal is to help balance orders placed in the pre-opening phase and to reduce their possible effects on the Indices. The new procedure will extend the pre-opening phase by several minutes if the expected fluctuation in the TA-25 Index in the opening phase is more than 2.5%.
The new procedure will be used as follows:
- If an order is placed, which will increase the expected fluctuation of the TA-25 Index by more than 2.5%, the pre-opening phase will automatically be extended for a period, chosen at random, of between three and five minutes. At the end of which, another Price Discovery attempt will be made.
- If the expected fluctuation of the Index after the first extended period is still more than 2.5%, the pre-opening phase will automatically be extended for an additional three to five minutes. At the end of which, another Price Discovery attempt will be made.
- If the expected fluctuation of the Index after the second extended period is more than 5%, the pre-opening phase will be postponed for 45 minutes. At the end of which, another Price Discovery attempt will be made.
- If the expected movement of the Index after the third extension is less than 12%, the opening Index will be calculated according the opening prices of the stocks and the continuous trading will commence.
Dror Shalit, Senior Vice President and Head of the Trading and Clearing Department said that this kind of procedure operates successfully in the London Stock Exchange and constitutes a further improvement of the pre opening phase at the "TACT": "The Stock Exchange is acting to safeguard trading and to minimize manipulations. Today, the TA-25 Index is fixed randomly within 5 minutes of the opening phase. The aim of this new procedure is to curb manipulations and to give investors more time to react and reduce volatility". Shalit added that this procedure is especially important on the expiration day of options on the TA-25 Index.
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