According to current trading rules, on the first day of trading in a security, the base price is determined as follows:
· For the vast majority of securities first listed for trading – no base rate has been set, but a uniform opening parameter (PFA) of 1 penny has been used, which is in fact a substitute for “a price has not yet been set”.
· For traded foreign funds and dual shares – the last price set for the security on the stock exchange abroad is multiplied by the known representative rate, in agorot, of the trading currency on the stock exchange abroad.
The current wave of IPOs on the Tel Aviv Stock Exchange has sharpened the need to adopt a technological and methodological solution, in order to better reflect the performance of the new securities traded on the stock exchange and allow the investing public to make investment decisions.
Recently, public companies that made initial public offerings approached the stock exchange and requested that the base price be based on the issue price, in order to present the yield on the security from the date of the issue. After examining the professional staff of the stock exchange with market activists that include, among others, institutional entities, stock exchange members and managers of mutual funds, it was decided to adopt the change so that the base price reflects the fair value of the security.
The change will allow the calculation of return from the first trading day and will be an important tool for researchers and investors who are interested in calculating a return per share based on the issue price. In addition, transactions will be possible on the first trading day without unnecessary controls (in contrast to the current situation where some members allow an order to be entered on the first trading day, only after approval because their systems show a seemingly high volatility, against the base rate set at 1 penny).
The said amendments are subject to the approval of the Securities Authority and shall enter into force 14 days after the approval of the Authority.