Bank of Israel Regulation for Shekel Derivatives Commences in January 2017

Reporting obligations apply to all financial entities based in Israel or abroad that trade shekel derivatives.
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Many FX brokers have products denominated in shekels and may not realise that they have reporting obligations to the Bank of Israel as well as their standard jurisdictional reporting requirements. FX brokers should review the reportable requirements list to determine whether or not they will need to commence reporting in January 2017 in order to maintain compliant when trading shekel derivatives.

The Bank of Israel’s reporting obligations for shekel reporting mandated under chapter 39(b) of the Bank of Israel Law 5770-2010 will commence on 1 January 2017. Financial entities that fail to report and continue to trade shekel derivatives will be subject to monetary penalties by the regulator.

Reporting obligations apply to financial entities trading shekel derivatives based in Israel as well as all other financial entities that trade shekel derivatives regardless of whether they or their counterparties are based in Israel or abroad.

Background

All non-Israeli firms who are above the reporting threshold, as outlined below, that trade the Israeli shekel will be required to report for over the counter (OTC) derivatives on FX and rates from 1 January 2017.

The reporting threshold is equated to the daily value of shekel trades executed, on a rolling period of one year (being 250 days in a year). If the average daily value of shekel trades executed is in excess of USD 15 million, brokers will be required to report to the Bank of Israel.

The reporting requirement will continue until another year has passed where the daily value of shekel trades has not met the threshold.

The following is a list of reportable instruments where they are shekel based, involve shekels or reference a shekel yield or interest rate:

• FX spot

• FX forwards

• FX swaps

• FX CFDs/spreadbets

• Inflation swaps

• Forward Rate Agreements (FRAs)

• Interest Rate Swaps (IRSs)

• Coupon swaps

• Basis swaps

• Cross-currency swaps

• FX options (both deliverable and non-deliverable)

• Inflation options

• Rates options, caps and floors

What is the reporting deadline and how are reports submitted?

The reporting deadline under the Bank of Israel’s regulation is T+1, being the day after the trade is executed.

A monthly report of all reportable transactions executed in that month is also required to be submitted, as well as all transactions outstanding at the end of the month and their valuations.

Financial entities that have Bank of Israel reporting obligations can report in one of two ways: 1. Downloading a reporting form from the Bank of Israel’s website and emailing the report to the regulator, or 2. Reporting through the financial intermediary who executes the transactions.

 

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