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The Board of Directors of the Tel Aviv Stock Exchange (TASE: TASE) has decided in its meeting (Thursday, February 18, 2021) to modify the rules for determining the base price on the first day of trading of a security.
According to the existing rules of trading, on the first trading day of a security, the base price is determined as follows:
- For the vast majority of the securities that are listed for trade for the first time - no base price is determined, but rather a uniform opening parameter (UOP) of 1 agora is used as a substitute for “the price has not yet been established".
- For foreign ETFs and dual listed shares - the last price set for that security on the foreign Stock Exchange, multiplied by the known Representative Exchange Rate (in agorot) of the currency in which trading is conducted on the foreign stock exchange.
The current wave of IPOs on TASE has underscored the need for a technological and methodological solution that better reflects the performance of the new securities that are traded on TASE. This will enable investors to make investment decisions based on the actual change in the share price since the date of the IPO.
TASE has been recently requested by public companies that had performed IPOs to determine the base price as the IPO price, in order to reflect the yield on the security since the date of the IPO. Following an examination performed by the TASE professional staff together with market players, including public institutions, TASE members and ETF managers, it has been decided to adopt the change such that the base price will reflect the fair value of the security.
The change will allow the calculation of yield from the first day of trading and will serve as an important tool for researchers and investors seeking to calculate the yield on the share based on the IPO price. This will also facilitate the execution of transactions on the first day of trading without superfluous controls (as opposed to the current state of affairs, where some members require their prior approval for orders entered on the first day of trading, as their systems presumably present a strong fluctuation in relation to the base price set at 1 agora).
The aforesaid amendments are subject to approval by the Securities Authority and will come into effect 14 days following the Authority's approval.
