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On January 7, 2024, COCO Bonds’ NIS 50,000 Par Value Trading Unit Was Cancelled and A Minimum Order Size of NIS 10,000 Was Set
Only two weeks since the cancellation of the trading unit the average daily trading volume of COCO bonds triples compared to the 90 trading days that preceded the change.
Tel Aviv, January 25, 2024 - TASE continues to upgrade the Israeli capital market, making COCO bonds accessible to the public: after authorizing the credit card companies, on January 12, 2023, to issue COCO bonds alongside the banks and the insurance companies, starting on January 7, 2024, COCO bonds’ NIS 50,000 par value trading unit was cancelled and a minimum order size of nis 10,000 was set in its place. As a supplementary measure, TASE has developed a technological capability that enables investors to sell in auctions any quantity that they hold, without limitation.
There are currently 24 series of COCO bonds traded on TASE, 23 of which were issued by the banks. The banking system is renowned for its prudence, stability and meticulous supervision and has proven resilient in the face of multiple financal crises in recent years.
Before the cancellation of the trading unit, the public had limited exposure to COCO bonds, its direct access hindered by the sizable trading unit, and the indirect access, through index-tracking products that support diversification, blocked by the complexity of tracking and the lack of competition. Consequently, trading in COCO bonds was significantly lower than that of ordinary corporate bonds issued by the banks: the turnover ratio (turnover divided by market cap) of COCO bonds was 5 times smaller than the turnover ratio of ordinary corporate bonds issued by banks.
Only two weeks since the cancellation of the trading unit the average daily trading volume of COCO bonds trilples compared to the 90 trading days that preceded the change.
The cancellation of the trading unit and its replacement with a minimum order size is expected to encourage the incorporation of those bonds, which have a high average rating of AA-, into existing and new financial instruments.
COCO bonds benefit both the issuers and the investors. COCO bonds allow the issuer to enhance its regulatory capital and expand its activity without diluting the holdings of the existing shareholders.
It should be noted that, in April 2023, TASE launched the Tel Bond-COCO A+ Index, which has increased by 6% since its launch.
