Dividend is a portion of profits that a company can distribute among its shareholders (the investors in the company). The dividend payment is proportional to the value of the shares the shareholders hold and to their rights in the company.

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When a benefit (such as dividend, rights, interest payments) is distributed to holders of a given security, the price of the security is diminished by the net value of the benefit. The ex-date security price is the base price of the security on the trading day following the distribution of benefits, and is the price that serves to calculate the stock market indices. This method adjusts the influence of the benefit distribution to holders of the security, to the value of the indices.

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The liquidity of a given share is ranked according to its average daily trading turnover (in ILS) during the six months preceding the record date.

For example, if the scheduled rebalancing date is January 1, then the average daily turnover will be calculated for the period starting on June 16 and ending on December 15 (the record date). In case of a share listed for less than six months, the average daily turnover will relate to the period since it was listed.

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The market cap. of a share serves to determine the composition of shares in market cap. indices, and is calculated as follows:

• The average closing price for the share is calculated for the trading days between June 1 to June 15, or December 1 to December 15, according to the relevant record date.
  If the ex-share price is calculated for the period between the 1st of the month and the 15th, then the average closing price of the share shall be calculated so that each of the closing prices between the 1st of the month and the cum-date shall be multiplied by the ratio between the ex-share price and the cum-share price. 

• The average share price is multiplied by the company's IANS, which was set on the 15th of the relevant month.
   

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The amount of shares listed for trading, for the purpose of calculating shares’ weights in the index.

IANS  quarterly  update

IANS weekly update

IANS Immediate update

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The total number of shares publicly owned and available for trading (i.e., not by parties of interest).

What is the Index adjusted free float for the purpose of calculating index weightings?

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The fixed public’s holdings percentage (Public Float Rate) which is used to calculate the shares’ weights in an index

Index adjusted free float rate update

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The IANS is multiplied by the Index adjusted free float rate.

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The index adjusted free float, multiplied by the share price.

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Any share listed up to the record date (inclusive) is eligible for inclusion in the index, from the upcoming rebalancing date.

How are its market cap and average daily volume of trade calculated?

The average market cap. and daily turnover of the share are calculated for the days in which it is traded.

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The types of shares that cannot be included in the index are:

• Delisted shares.
• Suspended shares
• Shares in the Maintenance list.
• Shares in the Illiquid Securities list.

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The index is confined to shares. It excludes index linked notes, structured financial products, convertibles (convertible bonds and warrants) and the like.

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When a company has multiple types of shares listed that differ in Par, can all of them be included in the index?

Other than the Maala SRI, an index may include more than one type of share issued by the same company. Each type of share is evaluated individually, independently of the others.

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Each index has its own set of threshold criteria. The market cap indices have three main prerequisites:

• Minimum liquidity ranking.
• Minimum Index adjusted free float rate (public float rate).
• Minimum Index adjusted free float market cap.

Specialty indices (such as the Tel-Div 20 and the Maala SRI indices) have specific criteria, depending on their specialty.

The following table presents the main criteria for inclusion in the continuous-trading stock indices. For more details on each index, click on the index name.

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Share weights in the continuous-trading equity indices are calculated by free float methodology from February 3, 2008.

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For the full methodology of calculating indices by free float methodology - click here.

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Shares will be weighted by free float methodology in all the continuous-trading equity indices.

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Following is the full list of continuous-trading indices that the TASE calculates:

• TA-25 index
• TA-75 index
• TA-100 index
• MidCap-50 index
• MidCap-120 index
• TA-Banks index
• Estate-15 index
• Finance-15 index
• Tel-Tech index
• Tel-Tech 15 index
• Tel-Div 20 index
• Maala SRI index

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Since February 2008, the TASE started updating and calculating the continuous-trading equity indices by international standards.

The Main differences between the new and old method:

• The weight of a share is calculated by the Index adjusted free float market cap. rather than by the total market cap. – The weight of each share in the continuous-trading equity indices will be determined by the Index adjusted free float market cap. in each share, as accustomed in other leading indices around the world.

• Share capital listed for trading for the purposes of calculating share weightings will be updated quarterly instead of daily – Share weightings in the index will be influenced by Index adjusted free float market cap., which is the multiple of the market cap and the index adjusted free float rate. The market cap is the multiple of the IANS and the share price.
  
  IANS will be updated on a quarterly basis, in principle on the first trading day of each quarter. In the past, share weightings were revised daily, with changes in the share capital registered for trade.
  
  However, under the free float methodology, special circumstances may warrant that IANS will be updated between quarterly updates. 

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The new constituents of an index, which will come into force on the rebalancing date, are determined at the end of the record-date.

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Other than in the case of the Maala SRI index, the composition of the indices is updated twice a year:

• On the first trading day in January.
• On the first trading day in July.

The composition of the Maala SRI index is updated once a year, on June 15.

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Other than in the case of the Maala SRI index, the record dates for rebalancing the composition of indices are:

• December 15, for the update coming into force on the first trading day of January.
• June 15, for the update coming into force on the first trading day of July.

The record date for rebalancing the Maala SRI index is June 5, for the update coming into force on June 15.

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In the case of the continuous-trading equity indices, except for the Maala SRI and Tel-Div  indices, the process is as follows:

1.   Shares that do not meet the eligibility criteria are removed.

2.   The number of shares in the index is restored to the "original figure".

For example, if the TA-25 index is left with less than 25 shares, then the shares with the highest market capitalizations among the shares not already included in the TA-25 index will be added, as long as they meet the threshold criteria, until the index has 25 shares again. 

If the index has more than 25 shares, then the ones with the lowest market capitalizations will be removed, until it reaches 25 shares again.

3.   Replacing shares based on market cap.

Stage One.
A test is conducted to see whether the value of the share with the highest market cap. among the shares that do meet the index threshold criteria, but are not in the index, is higher than the market cap. of the share with the lowest market cap among the shares in the index. If the difference is greater than 20%, then the share is added, bouncing the index share with the lowest market cap.

Stage Two.
That process is repeated as long as the difference between the incoming share and the outgoing one is greater than 20%.

Note that the comparison is done so that the share with the lowest market cap., among the shares in the index, contends against the share with the highest market cap. among the shares not in the index.

For example, in the TA-25 index, the share with the lowest market cap. would contend against the share with the highest market cap. that is not included in the index and the share in 24th position in the TA-25 index would be compared against the share with the second-highest market cap. that is not included in the index. The test continues in this manner until the difference is less than 20%.

Example: At the end of trading day on the 15th of the month before the rebalancing date (the record date), the following figures were collated for the four shares with the lowest market cap. on the TA-25 index, and the four shares with the highest market cap. not on the TA-25 index, which were therefore candidates to join the index:

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IANS is regularly updated on a quarterly basis, as follows:

(The new IANS is determined at the end of the record date, and will come into force on the scheduled update.)

Between quarterly updates of IANS, the data is checked on a weekly basis, in order to ensure that no substantial change has taken place. If substantial change has taken place, then IANS undergoes a weekly update, as follows:

1.      Precondition for weekly update

A weekly update shall take place if there is a difference of at least 10% between a company's current registered share capital against its IANS at the record date.

2.      Record date

Monday, at the end of the session (calendar).

3.      Update date

a.    Weekly updates of IANS shall take place on the first trading day of the week following the record date.

b.    No weekly update shall take place in any share that has undergone an immediate update of IANS during the week before the weekly update date.

c.      No weekly update shall take place in any share on the following dates:

i.  The period starting on December 15 and ending at the end of the week including January 7.

ii. The period starting on March 15 and ending at the end of the week including April 7.

iii.The period starting on June 15 and ending at the end of the week including July 7.

iv.The period starting on September 15 and ending at the end of the week including October 7.

4.      Comment:

If the TASE is closed for trading for two days among the days between Tuesday and Thursday, then there will be no weekly updates of IANS in the following week.

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Events can occur between quarterly or weekly updates of IANS that justify an immediate update of IANS, as detailed below:

1.       Events that justify an immediate update of IANS

a.        Split.

b.        Capital consolidation– when two kinds of shares are included in the index.

2.       Record date - The record date will be the cum date of the event.

3.       Update date – The update will take place on the ex-date of the event.

Cum-date, ex-date - defined as links in full list of FAQs.

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The Index adjusted free float rate is updated simultaneously with the IANS updates. Every time the IANS is updated, so is the Index adjusted free float rate.

If IANS is not updated, then the Index adjusted free float rate is not updated either, even if it has changed, according to an announcement to the exchange.

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A share's weight in the index reflects the ratio between its Index adjusted free float market cap. and the total Index adjusted free float market cap. of all the index constituents.

The weight of each share is calculated on a daily basis, before trading starts, using the following formula:

where:

To minimize the impact of a single share's volatility on the index as a whole, a cap has been predetermined for the shares in the index. Any "surplus weight" of the biggest shares in the index gets distributed proportionally between the rest of the shares in the index, whose weights are amended accordingly.

The following shows the maximal weight a share can have in the continuous trading equity indices:

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Indices are statistical measures reflecting changes in the securities market. The index is essentially an imaginary portfolio of a select group of securities, reflecting their average price level. Change in an index represents a change in value of the investment for better (profit) or worse (loss) in real time during the trading session, and over time.

When an index is launched, a base level is predetermined (in points). Changes in the share prices add to or detract from that base level, according to their relative weight in the index. The height of the index reflects the changes in the shares comprising it since its launch.
 

Example:

• The index base level is 100.
• The weight of a given share is 5%.
• The share lost 50% of its value on a given day.
• None of the other shares in the index changed.

In that case, the index dropped by 2.5% (50% * 5%) to 97.5 points.

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There are four cases in which a share can be added to an index other than at the official date:

1.       Fast track for a new dual-listed share

2.       Fast track for a new large-cap company after an IPO

3.       In some cases in which an index constituent undergoes a merger process.

4.        In some cases in which an index constituent undergoes a process of share capital consolidation.

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When a share listed for trading abroad dual-lists for trade on the TASE, it will be added to the index in a fast-track (before the biannual rebalancing), if it meets the following criteria:

1. The share is traded abroad in an exchange approved for the fast-track process. The approved stock exchanges are the NYSE, Nasdaq and LSE.
2. The share meets the index threshold criteria, excluding liquidity ranking.
3. The share meets the terms shown in the table below: 

Tel-Div 20 – The dividend return on the share must be higher than the dividend return on the share that has been 20th among the dividend returns of the shares included in the index at the time of the last update. A share can be included in the Tel-Div 20 as long as it is included in the TA-100.

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When a new share is listed for trade on the TASE, it will be added to the index on the fast track, meaning before the next scheduled biannual index rebalancing, if it meets the following conditions:

1. The share meets the index threshold criteria, excluding liquidity ranking.
2. The share meets the terms listed in the following table: 

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There are two main cases of merger that affect index composition:

1.     Merger of two companies with shares in the index:

a.      When the acquiring company is one of the companies listed in the index

   i.    The acquired company's share will be delisted from the index at the end of the merger cum-date.

b.     When the acquiring company is a new third party, whose shares are listed for trade.

i.      The shares of the two acquired companies will be delisted from the index at the end of the merger cum-date.

ii.    The new acquiring company will enter the index according to the rules.

2.      Merger of two companies that are listed for trading in TASE  but only one of them has  shares in the index:

a.      When the acquiring company has shares in the index:

i.      Nothing particular needs to be done.

b.    When the acquiring company is listed for trading on the TASE but isn't in the index:

i.      The acquired company's share will be delisted from the index at the end of the merger cum-date.

ii.      The acquiring company's share will join the index according to the rules.

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There are two main cases that impact index composition:

1.      The consolidation involves two shares listed on the index.
The delisted share following the consolidation process will be removed from the index at the end of the share capital consolidation cum-date.

2.      The consolidation involves an index share and a share not in the index.

a.   When the share remaining after consolidation is the one listed in the index:

i.      Nothing particular needs to be done.

b.  When the share remaining after consolidation is the one not listed in the index:

i.      The share delisted following the consolidation will be removed from the index at the end of the share capital consolidation cum-date.

ii.     The share remaining after consolidation shall enter the index according to the rules.

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These rules apply in the event of merger, share capital consolidation, the track for dual-listed shares and the track for new shares:

1. The share will be included in the index at the IANS update, after 14 days have passed since the following dates:
   1. Fast-track for a dual-listed share – the first trading day for the share.
   2. Fast-track for a new large-cap share – the first trading day for the share.
   3. Merger – the merger cum-date.
   4. Share capital consolidation – the consolidation cum-date.

2. In the events of merger and share capital consolidation, if the acquiring share is not listed for trade on the event cum-date the share will join the index only if listed for trade within 10 trading days as of the event cum-date. In that event, the share will join the index at the next update date of IANS, after 14 days have passed since its listing for trade.
3. The record date according to which the share's IANS shall be determined, will be the record date preceding the update date of IANS on which the share joins the index.
4. If the update date of IANS did not take place by the record date for constituents rebalancing, then the fast track shall not apply. The share may join the index only if it meets the update terms relevant to biannual constituents rebalancing, just like all the other shares on the TASE.

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