TASE Launches Options On Israel Government Bonds

TASE Launches Options On Israel Government Bonds

The Tel Aviv Stock Exchange (TASE) continues to expand Israel’s derivatives market with the launch of options on non-linked shekel-denominated government bonds. The new options were designed by a joint team of TASE, the Ministry of Finance, and Prof. Dan Galai. Trading is scheduled to commence on 10 November 2011. 

TASE is making preparations for the designation of market makers for these new derivative products, in order to provide liquidity of the market from its inception.

The new options augment the tools at the disposal of bond investors, broaden the spectrum of investment strategies in fixed income instruments, and enable investors to more effectively hedge their investments.

The options will be launched on two series of government bonds: series 0120, maturing in January 2020 and series 0217, maturing in February 2017.The terms of the options can be summarized as follows.

 

Contract Size

NIS 100,000 par value

Expirations

one, two and three months

Price quotations

in NIS

Reference price for exercise

opening price of the series on the trading day preceding the second Friday in the month of exercise

Settlement

cash

Option type

European

 

“The launch of options on government bonds addresses the demand for hedging instruments in the fixed income market”, comments Ester Levanon, TASE CEO.

According to Eran Heimer, Senior Deputy Accountant General at the Ministry of Finance, “The launch of options on government bonds contributes to the efficiency of the government bond market, serving investors and the government alike. These options help key players in the bond market mitigate risks and hedge exposures.  It is anticipated that they will also increase the liquidity of the underlying government bonds, and as a result, will lower the cost of raising capital for the government”.

The TASE Board of Directors approved the launch of the new options.