The Stock Exchange announces a reform of the bond indices, according to which the indices will be updated once a month instead of once every six months, similar to the practice accepted in world bond indices and the stock exchange index methodology. The proposal will be raised for public comment today.
As part of the reform, the calculation of the bond indices will be prepared and updated once a month, a move that will allow a significant upgrade in the management of the indices, adding elements such as a weight limit factor to the paper and issuer, adding new series to the indices every month, gradually reducing series weight towards the end of its life. And more complex. The name of the government bond indices will be called the Tel-Gov indices.
The bond indices are traded on the stock exchange continuously during the trading day, similar to shares. This situation is a significant advantage that allows the public to trade transparently and continuously in the bond indices, in contrast to trading in the world, where trading is conducted outside the OTC stock exchange. NIS 50 billion.
Fixed parameters for weight calculation: At present, any change in the capital of the bond series is reflected in the weight of the bond series immediately on the day after the change and an adjustment is made to the weight ceiling on a daily level. These frequent changes require index trackers to update their holdings accordingly and make it difficult to track the index. As part of the reform, the parameters for calculating the weight of a series of bonds will be determined once a month and will be used to calculate the index throughout the month, similar to the practice accepted in world bond indices and the stock market index methodology. Fixing the parameters will significantly facilitate the index trackers and will allow the launch of innovative metrics based on the ability to determine the compositions and manage the weight of the series in the index according to the defined theme, whether it is a qualitative theme (e.g. ESG), quantitative theme (e.g. statistical calculations) or financial theme (e.g. reports Financial and financial relations).
Issuer weight ceiling: Regulations under the Mutual Investments in Trust Law limit the exposure of a hedge fund and a mutual fund to all bond series of an issuer to 25% and deviation from this weight is accompanied by enforcement measures by the Securities Authority. So that the weight ceiling for the issuer will be distributed proportionally among all issuer series that meet the threshold conditions of the index and there will be no need to subtract an appropriate series.
Deduction and graded addition to the index: Thanks to the fixation of a weight limit factor as part of a monthly update that provides a monthly “window” for changes, a series of bonds will be added to the index in 3 consecutive update dates and not in a single loss, as has been the case to date. For the last 3 monthly update dates of the series.
Monthly update = fast track: The transition to updating monthly index compositions is equivalent to the fast track to entering indices. A new bond will be added to the indices shortly after it is listed for trading and will not have to wait long before entering the indices.
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