On February 22, the Israeli Ministry of Finance published a draft bill for public comments to amend the Joint Investment Trust Regulations (Foreign Fund Unit Offerings).

These regulations regulate the listing of foreign funds for trading on the stock exchange in Israel.

Short, Closed List of Funds

According to the regulations, a traded foreign fund (mostly ETFs) may list for trading on the Tel Aviv Stock Exchange (TASE) only if the foreign stock exchange where it is traded appears on the list of stock exchanges included in the Second and Third Addenda to the Securities Law.

This list derives from the dual listing arrangement, which allows the securities of corporations traded on these approved stock exchanges to be listed for trading on the TASE.

The list was determined according to the following characteristics:

1. The law applicable to a particular foreign stock exchange.
2. The regulations regulating the exchange’s activities.
3. The mode of supervision by the local regulatory authorities. 

These numerous criteria have resulted in a relatively short list of approved stock exchanges.

However, reliance on the dual listing arrangement for the listing of foreign funds for trading is not necessarily correct. It even creates problems. For instance, some of the approved stock exchanges are irrelevant to the listing arrangement for foreign funds, while stock exchanges suitable for the arrangement are not included.

Expanding the Criteria

The suggested amendment to the regulations proposes, within the framework of the criteria for granting a permit to a foreign fund manager to offer a traded foreign fund’s units to the public in Israel, to stop examining funds according to the current closed list in the Securities Law. Instead, each stock exchange will be examined individually based on various quantitative parameters:

1. Volume of trading.
2. Number of traded funds.
3. Total value of assets in each stock exchange.
4. Characteristics of the applicable law.
5. Supervision of that stock exchange.

Should this amendment pass, managers of traded foreign funds not listed on approved stock exchanges will be able to reconsider listing their funds for trading on the stock exchange in Israel.

Comments on the proposed amendment may be submitted until March 14, 2022.

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