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On Thursday, June 26, 2006 the Tel Aviv Stock Exchange (TASE) introduced an amendment to rules governing Opening Phase stock trading. Dubbed the "English Opening", the revision is designed to curb sharp fluctuations of the TA-25 "opening index" resulting from either deliberate attempts to influence share prices or from unintentional errors in order submission.
In order to minimize instances of sharp fluctuations in the TA-25, the Pre-opening Phase will be extended, giving investors the opportunity to submit additional orders to mitigate surplus demand or supply. This innovation is particularly meaningful for trading on TA-25 option expiration dates, since the "opening index" constitutes the reference index for option exercising. In the past, expiration days were sometimes prone to sharp price fluctuations.
In cases in which the theoretical price is expected to fluctuate more than 2.5%, the "English Opening" will trigger an extension of trading during the Pre-opening phase in the following manner:- If the projected fluctuation of the "opening index" exceeds 2.5%, pre-opening phase will be randomly extended by 3-5 minutes ("first extension").
- At the end of the first extension, the theoretical price will be calculated and the anticipated fluctuation reassessed. Should the latter continue to exceed 2.5%, pre-opening trade will be extended for an additional 3-5 minute period ("second extension")
- If at the end of the second extension, the projected fluctuation of the "opening index" is less than 5%, the "opening index" will be calculated and disseminate. Should it exceed this threshold, TASE's "circuit breaker" procedures will be initiated, and three attempts to arrive at an "opening index" falling within a 12% fluctuation limit will be made.
