Tel Aviv Stock Exchange: Corporate Bond Indices Liquidity Reform

The Tel Aviv Stock Exchange (TASE) is advancing a liquidity reform in the corporate bond indices, expected to take effect on August 27, 2026. The initiative, building on the success of the liquidity program in equity indices, is designed to improve returns and reduce volatility for index investors, as well as attract new market participants, including foreign and retail investors. TASE’s unique position in bond trading creates an opportunity to further develop the market and leverage activity, based on the understanding that increased tradability will provide a significant advantage – expanding the investor base and improving the depth and stability of the local bond market.

The new reform builds on the success of the liquidity program in the equity indices and constitutes an important pillar in the development of the bond market in Israel. The corporate bond market on the Exchange is experiencing continuous growth; however, there is a mismatch between the size of the market and the scope of tracking and managed products invested in it, and the liquidity level in the secondary market on the TASE.

During this period, there has been growing interest among the retail investors in bond products, reflected in significant inflows into passive and actively managed mutual funds, making the liquidity issue more acute and requiring intervention.

At its meeting on June 16, 2026, the TASE Board of Directors approved adjustments to the reform methodology to streamline liquidity requirements and ensure that the indices reflect series with consistent tradability:

• Elimination of the average daily turnover requirement: This criterion was removed due to its sensitivity to exceptionally high trading days, which may bias the average upward and do not necessarily reflect constant liquidity.
• Adoption of “median daily turnover” as the key parameter: The median turnover will serve as the primary and more stringent test for meeting liquidity requirements, calculated over a 180-day period. Series with a trading history shorter than 180 days may appoint a market maker to shorten the waiting period. TASE operates a sophisticated market-making system that enables continuous monitoring of market-maker activity in each security, allowing companies to receive ongoing information regarding the liquidity of their bonds.
• Differentiation between entry and exit thresholds: To ensure stability in index composition and reduce excessive turnover, a higher threshold has been set for entry than for exit. For example, in the Tel Bond-20 Index, a bond series will be required to meet a median turnover of NIS 2 million for inclusion, while the exit threshold will be NIS 1 million. In the Tel Bond-40 and Tel Bond Shekel-50 indices, the entry threshold will be NIS 1 million and the exit threshold NIS 500 thousand.

Reducing costs for index trackers
The liquidity reform in the Tel Bond indices is intended to address the lack of tradability characterizing Israel’s corporate bond market, where trading volumes are significantly lower than those of government bonds. Increasing liquidity is expected to reduce volatility and prevent situations in which relatively small transactions directly impact yields and erode investors’ returns.

Bond series participating in the Exchange’s market-making program, as approved by the Board of Directors on January 20, 2026, will automatically meet the liquidity threshold conditions.

Yaniv Pagot, TASE EVP of Trading, stated: “The objective of the corporate bond indices reform is to enhance the Exchange’s index methodology for index holders. Incorporating a liquidity criterion into the corporate bond methodology will reduce volatility and increase return potential for investors. Improving and updating the methodology will contribute to the growth of assets tracking corporate bond indices on the TASE.”

To allow the market to prepare for the reform rules, the Exchange has set August 10, 2026, as the record date for meeting the new criteria. The reform will become effective on August 27, 2026.

Entry and Exit Thresholds for Index Inclusion:

^[1] This criterion applies to all bonds as of the implementation date of the criterion, August 27, 2026.