Securities Regulations (Trading Platform to its Own Account), 2014

Transcription

1 The following translation is intended solely for the convenience of the reader. This translation has no legal status and although every effort has been made to ensure its accuracy, the ISA does not assume any responsibility whatsoever as to its accuracy and is not bound by its contents. Only the original Hebrew text is binding and reader is advised to consult the authoritative Hebrew text in all matters which may affect them. Securities Regulations (Trading Platform to its Own Account), 2014 Under my authority according to paragraphs 44xiii(b)(5), (6), 44xxvix and 55a of the Securities Law 1968 (hereafter: the "law"), in accordance with the proposal of the Authority and with the approval of the Knesset Finance Committee, I hereby enact the following regulations: Definitions Chapter 1: Interpretation 1. In these regulations "The company's Internet site" The Company's Internet site by means of which the company offers its services to the public; "Margin" The difference between the amounts mentioned in clauses (1) and (2) and the unrealized losses, and on the condition that the company is permitted to use the entire difference to cover liabilities of the customer towards the company according to the terms of the framework agreement with the customer: (1) Unrealized profits; (2) Funds of the customer; "Required margin" The proportion of margin required from the client for a trade as mentioned in Regulation 4; "Framework agreement" An agreement between the company and the client according to Regulation 27; "Unrealized losses" Money owed to the company by the client as a result of an investment activity that has yet to be completed; "Trading platform" a trading platform as defined in paragraph 44L of the Law; "Company" A company that manages a trading platform; "Rating agency" An Israeli or international rating agency; "Israeli rating agency", "international rating agency" as defined in Regulation 83; "Limited company" A company managing a trading platform as defined in clause (2) of the definition of a "trading platform" in Paragraph 44L of the Law, and on the condition that it is not a counterparty to the liabilities implicit in the financial instruments it offers for trading; "Client contract" A financial instrument that a client trades in, for which the company is the counterparty to the liabilities implicit within it; "Exposure to credit risk", "source of credit risk" as defined in Regulation 83;

2 "Business day" A day on which the company is open to carry out trades with its clients, according to its bylaws; "Generally accepted accounting principles" as defined in the Securities Regulations (Annual Financial Reports) ; "The client's funds" (1) Each of the following: (a) Funds that the client deposited with the company less the client's liabilities to the company due to investment activity that has been completed according to the conditions of the framework agreement with the company; and including funds transferred by the client to the company by means of a credit card, bank transfer, check or other means of payment and which have not yet been settled; (b) Funds that are owed to the client as a result of investment activity that has been completed; (c) Funds owed to the client according to the terms of a financial instrument; (d) Funds owed to the client according to the framework agreement. (2) If the company has marked to market the client's securities on a daily basis according to the framework agreement with the client, the investment activity, which the mark to market relates to, will be viewed as investment activity that has been completed at the time of the mark to market; for this purpose, "marking to market" is the calculation of rights due to changes in the contract value or due to a trade that has occurred after the previous mark to market; "Client", "financial instrument" as defined in paragraph 44Lof the Law; "Financial institution outside of Israel" A corporation that incorporated outside of Israel which is involved in the receipt of deposits and which is supervised by the entity that is authorized to do so in that country; "CDS price" the Credit Default Swap contract prices for one-year and five-year maturities as quoted in the international information services, including Bloomberg and Reuters; "Material source of credit risk" a source of credit risk where the total exposure of credit risk components with respect to it, within the total value of exposure of all credit risk components, exceeds 5%; "Senior officer" as defined in Paragraph 37(d) of the Law; "Underlying asset" Commodities, interest rates, currencies, exchange rates, indexes or other financial instrument where the value of a financial instrument that is a contract or arrangement is derived from them; "Client asset" A financial instrument in which the client trades, for which the company is not counterparty to the liabilities implicit within it. 1 Collection of Regulations 2010, p. 662.

3 "Liquidity supplier" - A financial body that on an ongoing basis offers the purchase and sale of financial instruments and on the condition that the goal of using its services is to reduce the exposure to market risk, as defined in Regulation 83, to which the company is subject; "Quote supplier" An information system which on an ongoing basis electronically provides buy and sell prices of financial instruments, including Bloomberg and Reuters; "Fee" including the fee for rolling over a contract, interest spreads and quote spreads; "Trade" a trade in a financial instrument; "A trade not initiated by the client" A trade carried out in the account of the client not at his initative; "Exposure value of a credit risk component" as defined in Regulation 86; "Related party" as defined according to generally accepted accounting principles; "Group" a group of corporations and individuals who maintain control relationships between them, including a subsidiary, an associated company and a company controlled by a company that controls each one of them; "Risk groups" The first risk group, the second risk group, the third risk group and the residual risk group; "First risk group", "second risk group" and "third risk group", as defined in the Third Schedule; "Residual risk group" Credit risk components to which Regulation 86 (a)(4) applies; "Auditor" As defined in the fifth chapter of the fourth section of the Law of Companies; "Unrealized profits" Funds owed by the company to the client as a result of investment activity that has not yet been completed; "License" A trading platform license as defined in paragraph 44L of the Law; "Credit risk component" as defined in Regulation 83; "Market risk component" "general market risk component", "currency market risk component", "share market risk component", "commodity-dependent market risk component", "interest-rate-dependent market risk component" as defined in Regulation 83; "Postal Authority service" "postal service" as defined in the Post Office Law ; 2 2 Book of Laws 5746, p. 79; 5764, p. 71.

4 "Bank" as defined in the Banking Law (Licensing), (hereafter: the Banking Law); "Bylaws" as defined in paragraph 44R of the Law; "Periodic and Immediate Reports Regulations" Securities Regulations (Periodic and Immediate Reports), ; 4 "Prospectus Details Regulations" Securities Regulations (details of the prospectus and the draft prospectus structure and form), Chapter 2: Request for a License 2. Details of the request for a license (a) A company that is applying for a license to manage a trading platform (in this chapter the "applicant") will submit a request in writing to the Authority along with the following information, reports and documents (hereafter: the application); (1) A periodic report according to Regulation 75(a) to (e), as of a date not earlier than the date of application by more than 14 months (hereafter: the periodic report date); if the date of the periodic report is earlier than the date of the application by more than five months, the latest quarterly report, as defined in Regulation 38 of the Periodic and Immediate Reports Regulations according to Regulation 74, will be attached, and on the condition that: (a) The instructions of Regulation 60 and 62 to the Prospectus Details Regulations will apply, with the required changes; (b) With respect to Regulation 9a of the Periodic and Immediate Reports Regulations, they will be viewed as saying "the date of the application" instead of "the date of the approval of the financial reports" and the changes in form and grammar will be made accordingly; (c) With respect to Regulation 38b of the Periodic and Immediate Reports Regulations, they will be viewed as saying "the date of the application" instead of "the date of the approval of the interim financial reports" and the changes in form and grammar will be made accordingly; (2) An allocation report due to risks and regulatory equity capital as stated in Regulation 75(f) and on the condition that if a quarterly report has been attached according to the instructions of clause (1), only an allocation report due to risk and regulatory equity capital as specified in Regulation 74(e) will be submitted; (3) A report of profitable clients and non-profitable clients according to Regulation 76(1), prepared not earlier than one month prior to the application; 3 Book of Laws 1981, p. 232; 5770, p Book of Laws, 5730, p. 2037; 5771, p Book of Laws, 1969, p. 1794; 5771, p. 604.

5 (4) A report on activity according to Regulation 76(2) prepared not earlier than one month prior to the application; (5) A credit risk report according to Regulation 76(3) prepared not earlier than one month prior to the application; (6) A credit risk management policy report according to Regulation 76(4) prepared not earlier than one months prior to the application; (7) A market risk report according to Regulation 72 prepared not earlier than one month prior to the application; (8) A report prepared on the day of the application that includes the following details (hereafter: the additional details report): (a) The name of the applicant and his identity number; (b) The commercial name under which the applicant will provide its services if that is different from the name specified in subclause (a); (c) For an applicant that is incorporated outside of Israel the place of the applicant's incorporation and its identifying number in that location of incorporation; (d) The registered address of the applicant, telephone numbers, fax number and address, and if the applicant's place of incorporation or where it does business is outside of Israel (hereafter in this chapter: a foreign applicant), also the number and address of a person residing in Israel who is authorized to receive judicial documents and notifications for the applicant which are to be passed on to the applicant; (e) If the place in which the applicant operates differs from the registered address of his office, the details of the business address and the relevant telephone and fax numbers will be submitted; (f) If the applicant has an attorney representing it with respect to the license application, his details will be included and a power of attorney will be attached that authorizes him to represent the applicant before the Authority; (g) Details of the auditor who audits the applicant; (h) The date of incorporation; copies certified by an attorney of the applicant's incorporation documents which are in effect on the date of the application will be attached; (i) Details of existing or planned locations of the applicant's activity outside of Israel and a description of that activity; (j) With regard to each of the applicant's directors and substitute directors, details will be provided of the appointments as specified in Regulation 26 of the Periodic and Immediate Reports Regulations and paragraph 44BB(a) of the Law; with regard to the applicant, the details of the appointment will be provided according to paragraph 44BB(a); if an individual ceased being a director or a substitute director during the 6 months prior to the submitting of the application, the aforementioned details will be submitted, as well as the following: (1) The date he ceased serving as a director;

6 (2) Whether, according to what is known to the applicant, the circumstances under which he ceased to serve as a director should be brought to the attention of the Authority; and if so, those circumstances will be described; (k) With respect to a senior officer of the applicant whose details were not submitted according to subparagraph (j), the details of the appointments according to Regulation 26a of the Periodic and Immediate Reports Regulations and events as described in paragraph 44BB(a) of the Law will be provided; if the individual ceased serving as a senior officeholder during the 6 months preceding the application, the aforementioned details will be submitted, as well as the following: (1) The date he ceased to serve as a senior officer; (2) Whether, according to what is known to the applicant, the circumstance under which he ceased to serve should be brought to the attention of the Authority; and if so, those circumstances will be described; (l) With regard to a stakeholder of the applicant, the details mentioned in Regulation 33(c) of the Immediate and Periodic Reports Regulations, as known to the applicant, will be submitted; (m) The following details will be submitted with respect to controlling shareholders of the applicant: (1) The identity of the controlling shareholders and a description of the structure of control of the applicant, along with a chart that describes the applicant's structure of control; the country of citizenship or incorporation of the controlling shareholders and the country in which their activity is concentrated; if one of them is subject to regulation, then the name of the regulatory body will be submitted and details of the license; if a controlling shareholder has filled a position with the applicant, then his position with the applicant will be specified; in addition events as specified in paragraph 44BB(a) of the Law with respect to the controlling shareholder and senior officers will be described; (2) The business activities of the controlling shareholders during the last five years in Israel or abroad will be described; in addition, the names of other corporations in which they were controlling shareholders or served as senior officers during the last five years will be submitted; (n) With respect to an applicant that is part of a group (hereafter: the applicant's group), all the other bodies in the applicant's group who are not controlling shareholders of the applicant will be specified, including their names and identification numbers, the existing ownership structure among the applicant's group, including the percentages of holdings, the country of citizenship or incorporation of each and the country in which they manage their business activity; (o) The following will be specified:

7 (1) Whether the applicant or one of the bodies in the applicant's group is under the supervision of regulatory bodies in Israel or abroad; (2) Whether during the last two years applications by the applicant's or a different body in the applicant group for a license in the capital market under the supervision of the regulatory body in Israel or abroad have been rejected; (p) The proposed bylaws will be submitted; (q) With respect to the organizational structure of the applicant, the following will be specified: (1) The operational departments and an organizational chart will be attached; (2) The following details regarding the managers who are responsible for each of the operational departments mentioned in subclause (1) (hereafter: the responsible managers): (a) Name and ID number; (b) A description of his function and his area of responsibility with the applicant; (c) His professional training with respect to this function, including the name of the degree he received, the completion date of his training and details of the institutions where the training took place; (d) Work experience related to his position, including the name of the place of work where the responsible manager was employed; (3) The address of each operational department will be provided, if the applicant manages his business from more than one location; (4) A list will be provided of any entities external to the applicant which carry out some of its activities; (r) A description of the authority of the Executive and the Board of Directors; (s) A description of the technological system by means of which the applicant will provide its services and including a description of the entities external to the applicant who will operate the technological system or part of it and the areas of their responsibility, the technological system s interfaces with entities external to the applicant, the setup for saving of data, backup, information security and monitoring mechanisms, along with an expert opinion which certifies that the system operates according to accepted standards; in this context, "accepted standards" including SAE3402 and COBIT; (t) A description of the type of clients which the applicant intends to provide service to; if the applicant knows of a single client who is expected to generate more than 10% of the applicant's income, the circumstances will be described in brief; (u) A description of the applicant's planned marketing channels;

8 (v) Details will be provided of the banks or financial institutions outside of Israel where the client's funds will be deposited, as required by Regulation 21; (w) Details will be provided of liquidity suppliers and quote suppliers; in this context, a concise description will be provided of the agreements with them, including the terms for terminating the relationship or suspending the service for a specific time period; (x) A description will be provided of the material contracts to which the company is a party; (y) A description will be provided of the manner in which the applicant's clients will confirm trades carried out in their name or by them; (z) The following procedures will be attached: (1) For ensuring the recording and management of client assets, client contracts and client funds according to Regulation 17; (2) Procedures whose purpose is to ensure that the applicant identifies, measures, manages and monitors market risk, liquidity risk, credit risk and operational risk which arise from its activity; (aa) A foreign applicant will attach an attorney's opinion that is addressed to the Authority with regard to the following: (1)The laws that regulate the activity of the applicant in the country of origin, including the existence of sources of funds that will allow the applicant to meet its obligations; (2) the applicant's rules of corporate governance, including instructions regarding senior officeholders and how possible conflicts of interest are dealt with by the applicant, (3) a list of events as specified in paragraph 44BB(a) of the Law; (bb) A description will be provided of the insurance purchased by the company according to Regulation 88 and including a description of the areas of coverage of the insurance and its scope; in addition, a confirmation of the insurance and the decision of the company according to Regulation 88 will be attached; (cc) Consent of the applicant and that of the controlling shareholders to obtain information from the Criminal Registry will also be attached. (b) The instructions in Article 1 of Chapter 10 will apply to the application and the documents attached to it, with the required changes, and on the condition that the instructions of Regulation 44(c) and 48 do not apply and with regard to Regulation 45, only subregulation (c) will apply. (c) If there occurs a significant change during the period from the submission of the application until the date of the final decision on the application in a detail that is included or should be included in the application, the applicant will revise the application accordingly, not later than one week after the company first becomes aware of the aforementioned change, and it has the right to include in the notification of the revision information in the form of a referral; in this context became known to the company is according to its meaning in Regulation 50(b).

9 (d) The details in the application will be submitted if they are relevant to the business of the company and are material to their accurate presentation; without detracting from the aforementioned, all additional information needed for the accurate presentation of the applicant's business will also be submitted. (e) The Authority has the right to request additional details, documents or reports from the applicant if it decides that this is necessary in order to make a decision with regard to the application. 3. Inclusion by means of a referral An applicant has the right to include details that are required for the periodic or quarterly report, as mentioned in Regulation 2(a)(1) or in the report of additional details by means of a referral to a different report from the aforementioned reports in this Regulation which was submitted by the applicant and on the condition that the report which is being referred to is a previously written report, and the following instructions will apply: (1) Information will not be included in the form of a referral to another report in which that information is in the form of a referral; (2) Information will not be included in the form of a referral if this is liable to mislead or result in a lack of clarity; (3) The referral will be made explicitly and will mention the type of the other report to which the referral is being made, the chapters or paragraphs to which the referral is being made, the matter to which the referral is being made and the date on which the other report to which the referral is being made was submitted, while explicitly stating the fact that the information is being submitted by means of a referral; (4) Any development or update of the information submitted in the form of a referral will be submitted, if requested; (5) If the information submitted in the form of a referral is of a type that requires prior consent in order for it to be included in a report, then renewed consent as mentioned will be submitted for its inclusion in the present report in the form of a referral. Chapter 3: The Level of Leverage 4. Limiting the level of leverage (a) The collateral required from a client in a trade will not be less than the following rates: (1) 5% of the nominal value of the trade in the case of trades in financial instruments with a high level of risk; (2) 2.5% of the nominal value of the trade in the case of trades in financial instruments with an intermediate level of risk; (3) 1% of the nominal value of the trade in the case of trades in financial instruments with a low level of risk. (b) In this Regulation A financial instrument with a low level of risk a financial instrument whose value is derived from the value of currencies or gold or futures contracts on currencies or gold; A financial instrument with an intermediate level of risk a financial instrument whose value is derived from the value of one of the following

10 (1) Recognized indexes of foreign stock exchanges which are listed in the Sixth Schedule or futures contracts on these indexes; (2) Bonds whose time to maturity or to exercise for each one of them does not exceed ten years and which are issued by one of the following: a. The State of Israel; b. The US government; c. The government of countries whose credit rating according to S&P or Fitch is AA or higher and according to Moody s is Aa3 or higher; (3) Futures contracts on the bonds mentioned in clause (2); A financial instrument with a high level of risk a financial instrument whose level of risk is not intermediate or low. (c) The company will not allow a client to open a new trade if the margin that he provided is smaller than the total margin needed for all of the client s open trades together with the new one. (d) The company will not allow a client to withdraw funds from his account in the trading platform if as a result the total margin he has provided drops below the margin required for the client s total trades. (e) The instructions of this regulation will not apply to the clients listed below, on the condition that before they carried out trades they gave their prior written consent that they be considered as clients to which this regulation does not apply and that they are aware of the implication of their consent and if they are clients that are included in clause (6) or (9) of the First Schedule of the Law or clause (2) of this regulation, they provide their consent on an annual basis; an examination regarding the following clauses will be carried out annually: (1) Clients regarding whom clauses (1) to (11) of the First Schedule of the Law are apply; (2) An individual for whom one of the following applies: (a) The total value of cash, deposits, financial assets and securities, as defined in paragraph 52 of the Securities Law, in his possession exceeds 12 million new shekels; (b) The average monthly trade turnover in financial instruments of the type traded in the trading platform during the last six months is not lower than ten million new shekels; In this subregulation Trade turnover total of the trades closed by the client in the trading platform, according to their value in terms of the underlying asset. 5. Limiting the client s losses Total losses of the client from trades will not exceed the value of the collateral he has provided. 6. Dealing with a conflict of interest Chapter 4: Conflicts of Interest

11 (a) In its bylaws, the company will include a document that describes the policy for dealing with conflicts of interest (hereafter: the conflict of interest policy document); the policy for dealing with a conflict of interest will be determined according to the size of the company, the business activity it manages and its scope. (b) The conflict of interest policy document in a company which is part of a group will take into account the circumstances that are liable to lead to a conflict of interest between the company and the group or someone employed by the group or between a service provider on their behalf and the client, while taking into consideration the structure and business activity of the corporation and individuals in the group. 7. Chapters of the conflict of interest policy document (a) The conflict of interest policy document will include the following chapters: (1) Chapter 1: In the context of each of the company's or group's activities, a description will be provided of each of the circumstances which could lead to a conflict of interest between the company, the group or one of their employees or one of their service providers and the client; with respect to each circumstance, the nature of the conflict of interest (hereafter: "circumstance in which there is a conflict of interest") will be described; (2) Chapter 2: A description of the procedures, according to which the company will act and the means that it will use in order to prevent the conflict of interest described in Chapter 1 of the document or to reduce its scope if it is not possible to prevent it completely; (3) Chapter 3: A description of the circumstances from which the conflict of interest mentioned in clause (1) arises and which remain after the procedures and measures mentioned in Chapter 2 of the document have been implemented. (b) In this Regulation, "the company's activities" activities in the framework of which the company uses its judgment and which may affect the interests of the client, including conversion, setting of prices, a request from the client to add collateral, ascertaining whether activity in the trading platform is suited to the client and the cancelation or change in trades. 8. An activity that involves a conflict of interest (a) A company will not carry out an action in circumstances in which there exists a conflict of interest, unless the circumstances are described in Chapter 3 of the conflict of interest policy document. (b) When a client signs up with the company, the company will inform the client regarding the circumstances that involve a conflict of interest as listed in Chapter 3 and will receive the client's consent in writing; in this Regulation, "in writing" includes written consent sent by the client by means of the Postal Authority's services or by facsimile or by electronic mail; the Chairman of the Authority or an employee of the Authority he has authorized for this purpose has the right to allow the company to receive the consent of the client by other electronic means if he has determined that the presentation of the document and its contents and the manner in which the electronic consent was given facilitates a thorough examination of the document prior to its approval by the client.

12 (c) If there has been a change in Chapter 3 of the conflict of interest document, the company will notify the client of the change immediately. (d) The company will obtain the consent of the client in writing regarding the circumstances in which there is a conflict of interest according to Chapter 3 of the conflict of interest policy document at the end of each year; if the client refrains from renewing such consent within 30 business days from the end of the year, the company will notify the client in writing that he has not renewed his consent; in this context, "in writing" includes the aforementioned agreement in writing which the client has sent by means of the Postal Authority services, by facsimile or by electronic mail. (e) A notification according to subregulation (b), (c) and (d) will be sent to the client separately from any other document, in a manner that will draw the client's attention to what its written in it. 9. Preference for a client A company or someone acting on its belief will not show preference for one client over another; in this context, actions that are permitted by the company's bylaws will not be viewed as preference for one client over another. 10. Prohibition of providing advice and portfolio management services (a) A company or someone on its behalf will not provide advice on investing, holding, buying or selling a financial instrument that it trades in or an underlying asset of a financial instrument that it trades in; in this context, "advice" includes both direct and indirect advice, including by means of marketing material, newsletters and opinions, by mail, facsimile or other method. (b) Notwithstanding what is stated in subregulation (a): (1) A company has the right to refer its clients to factual information with respect to the underlying asset of a financial instrument which has been prepared and published by another party or someone on their behalf, on the condition that the referral is general and ongoing, that the choice of information is not according to the company's judgment and the information was not prepared or published at the request of the company; (2) A company or someone on its behalf has the right to publish an analysis, on the condition that the following conditions are fulfilled: (a) The analysis will be a general one and not aimed at a particular client; (b) The analysis will be available to all of the company's clients on the company's website and will not be sent to a particular client; (c) The analysis will relate to the conflict of interest between the publishing of the analysis and the services offered by the company; In this context, an "analysis" is a document that includes an analysis of an underlying asset of a financial instrument that provides reasoned information or a target price which can serve as the basis for a decision regarding the profitability of investing, holding, buying or selling of a financial instrument and on the condition that the document does not include an analysis of a financial instrument traded in the trading platform.

13 (3) A company or someone on its behalf will not carry out trades according to its judgment for its clients in a financial instrument that it trades in. 11. Documentation In the course of its activity, the company will document all of its actions and services that have created or are liable to create a conflict of interest and also all the notifications it has sent to a client in this regard and the consent it has received from the client. Chapter 5: The Client's Funds and Assets Article 1: General 12. The obligations of the company to the customer The company will operate with prudence, trust and diligence with respect to the client's assets, client's contracts and client's funds. 13. The protection of the client's rights A company will work to ensure the rights of the client with respect to the client s assets, the client s contracts and the client s funds. 14. The holding of client's assets and funds A company will hold client's assets and funds, whether directly or indirectly, only after it has signed a framework agreement with the client, as mentioned in Regulation The separation of the clients' assets and funds A company will hold the assets and funds of each client separately from its assets and funds and also separately from the assets and funds of parties related to it or its stakeholders; in this context, "the client's funds" does not include funds transferred by the client to the company by means of a credit card, bank transfer, check or other means of payment but which have not yet been cleared. 16. Management of records A company will manage records and accounts that clearly separate between the assets, contracts and funds of the client, according to the holdings of each client. 17. Prevention of damage A company will establish and implement procedures to ensure the recording and management of the client's assets, the client s contracts and the client s funds, in order to prevent, to whatever extent possible, the possibility of damage to the client as a result of fraud, failure or negligence. 18. Prohibition of use A company will not make use of the client s assets and client s funds for the benefit of other clients or its own benefit. 19. Client confirmation

14 A company will not make use of a client's assets and funds for the benefit of another client unless it has the prior approval of the client; the aforementioned in this regulation does not come to detract from the prohibition stated in Regulation Carrying out reconciliations and audits (a) A company will implement a reconciliation of the client's assets, contracts and funds on a daily basis, which will include the following: (1) It will calculate the balances of the assets, funds and contracts of each client while differentiating between the funds transferred by the client to the company by means of credit card, bank transfer, check or other means of payment but which have not yet been cleared (hereafter: uncleared balances) and the rest of the client's funds (hereafter: cleared balances). (2) It will verify the reconciliation of the total balances mentioned in clause (1) of all the clients with the total balances of the clients in their records, while differentiating between the cleared and uncleared balances; (3) It will verify the reconciliation between the cleared balances according to its records and the records of the bank or financial institution that holds the client's funds and the reconciliation between the total balances not yet cleared according to its records and the reference documents. (b) Once a month, and not later than ten business days after the end of the month, the company will receive from the auditor a special report, as defined by accepted auditing standards, regarding the reconciliation carried out by the company as mentioned in subparagraph (a)(3); this special report will be prepared as of one of the business days during that same month, as selected by the auditor according to his discretion and without prior notification of the company. In this chapter, a "business day" is a day on which most of the banks in Israel are open for carrying out trades with the public and, for companies that according to their bylaws do not operate on Sundays, not including Sundays. (c) If an inconsistency is found, the company will ascertain the reason for it and will immediately act to rectify. It. 21. Trust account for clients' funds Article 2: The Funds of the Client (a) The funds of a client will be deposited in a trust account in the name of the client; the account will be managed by the bank; in the context of this regulation, the "client's funds" are defined as in Regulation 15. (b) Notwithstanding what is stated in subregulation (a), a company is permitted to deposit client's funds in an account that is managed by a financial institution outside of Israel, on the condition that the following conditions are fulfilled: (1) The account is a trust account favor of the clients, and, in a country where this is not possible, the account will be segregated from the accounts in which the funds and assets of the company are held; (2) The company will verify that the CDS prices of the financial institution or the corporation controlling it, if there is one, do not deviate from the accepted level and will also check additional generally accepted indexes, if they exist, for estimating credit risk.

15 (3) One of the following is fulfilled: (a) The credit rating given by a rating agency to the financial institution was one of that agency's two highest ratings; (b) At least one Israeli rating agency has given a rating to the financial institution as specified in item (2) in the table in the Third Schedule or higher or at least two international rating agencies have given a rating to the financial institution as specified in item (2) of the table in the Third Schedule or higher; however, even if the financial institution has been rated according to what is stated in this subclause, the company will not deposit more than 25% of its clients' assets with the financial institution; (c) The Chairman of the Authority or an employee of the authority he has authorized for this purpose in writing who has been authorized in writing can permit the company to transfer its clients' funds to a third party which has promised to carry out all the obligations of the company according to this Chapter, and on the condition that it is persuaded that appropriate protection has been provided for the clients' funds; 22. Estimating the risk related to the bank or the financial institution outside of Israel A company will carry out an assessment of the risk related to the bank or financial institution outside of Israel with which it wishes to deposit its clients' funds before depositing those funds, as stated in Regulation 21 and on a continuous basis; as part of the assessment of risk, the company will examine, among other things, indexes of financial stability, its credit rating, its reputation and its experience; the company will document the assessments it has carried out and the considerations on which it has chosen the bank or financial institution outside of Israel for the purpose of depositing and holding its clients funds; in the context of this Regulation, the "client's funds" are defined as in Regulation Immediate deposit A company will deposit client's funds as mentioned in Regulation 21 with the bank or financial institution outside of Israel immediately on their receipt; if such a deposit is not possible for reasons not related to the company, the funds will be deposited in the aforementioned trust account on the following business day; in this context, the "client's funds" are defined as in Regulation Depositing in the same currency The deposit of the client's funds will be carried out in a deposit account of the same currency; if the company does not maintain such deposit accounts or the deposit accounts of the company are not in the same currency as that of the client's account, the company will inform the client of this and of the cost, fees and risks involved. 25. Immediate transfer of payment

16 (a) Without detracting from what is stated in Regulation 4(d), if the client has requested that his funds be withdrawn, the company will carry this out no later than the subsequent business day; however, the client's funds will be transferred to an account according to the client's instruction and according to the dates for clearing that are accepted in the banking system of the country in which the funds are deposited or within three days on which trade takes place in that country, according to the earlier of the two. (b) Notwithstanding what is stated in subregulation (a), if the client is required to take some action as a condition for withdrawing the funds according to the Money Laundering Law (in this paragraph, the action), the company will carry out the transfer no later than the next business day after the client has taken the action and on the condition that the company has informed the client of the need to carry out the action as near as possible to the date on which the client has asked to withdraw his funds. 26. Transfer of the client's funds to a bank or financial institution outside of Israel other than the one agreed upon If the company has decided to transfer the client's funds to a bank or financial corporation outside of Israel which is different from the one that it informed the client of when he signed up with the company, the company will inform the client of this as near as possible to the date of the decision. In this regulation, the "client's funds" are defined as in Regulation The framework agreement Chapter 6: Provision of Information to the Client Article 1: The Framework Agreement (a) Before the company receives funds from the client or carries out a trade for the client, the company will sign a framework agreement with the client that will include the details mentioned in the First Schedule and in addition to them the company can include other items which are required for the relationship; the framework agreement will be in writing and will be signed by the client; the company will provide the client with a signed copy of the framework agreement; in this context, "signing" includes signing the framework agreement sent by the client by means of the Postal Authority services, facsimile or electronic mail. (b) The Chairman of the Authority or an employee of the Authority that he has authorized for this purpose in writing, can permit the company to receive the client's confirmation of the framework agreement by other electronic means, if he finds that the manner in which the document is presented and its content and the manner in which electronic approval is given facilitates a thorough examination of the document prior to its approval by the client. (c) The company will keep an updated version of Chapters 1 to 5 of the framework agreement in its office and will publish this version in a prominent location on the company's website; the Chairman of the Authority or an employee of the Authority he has authorized for this purpose in writing has the right to issue instructions for the publication of the aforementioned version or parts of it in additional ways. (d) A company which has the right according to the framework agreement to change the conditions of the agreement simply by notifying the client will notify the client of such a 6 Book of Laws, p. 293; 2002, p. 214.

17 change at least two weeks before the change is carried out and the notification will include the date of the change. 28. Biweekly report Article 2: Reporting to the client The company will every two weeks provide the client with a report of his balances as of the end of that period; such a report can be sent to the client's electronic mail address; the report will include the following: (1) A list of the client's assets and funds in his account and the instructions given and trades carried out in that account; (2) Regarding clients who have client contracts, the report will also include: (a) A list of the client contracts and prices at which they were purchased or the collateral that was deposited for them according to the circumstances; (b) The value of the client contracts or the unrealized profits or unrealized losses, according to the circumstances. 29. Monthly report (a) The company will provide, not later than the first day of each month, a monthly report concerning the previous month; the report will include the following items: (1) The balance of the account at the beginning of the reporting period; (2) The trades carried out in the account, including the expiration of a financial instrument and the exercise of a financial instrument and for each trade: the date, underlying asset, sale or purchase, quantity and price; (3) The open trades in the account and the date of opening, the underlying asset, quantity, the price at which the trade was opened and the unrealized profits or unrealized losses; (4) Deposits and withdrawals; (5) Debits and credits in the account; (6) A list by type of the payments and debits collected by the company, including fees and excluding quote spreads; (7) The total profits and losses from the trades; (8) The balance of the client's account at the end of the reporting period. (b) The report will be sent to the client by mail and if the client has given his consent in writing or by electronic means, the report will be sent to the client's electronic mail address. 30. Confirmation of an instruction or trade The company will provide confirmation to the client which will include information on the execution of a trade or the provision of an instruction according to Chapter 11 immediately after the instruction is given or the trade is executed, according to the circumstance and will provide the cumulative balance in that financial instrument after the execution of the trade; such a confirmation can be sent to the client by electronic means. 31. Possibility of storing by electronic means

18 The company will provide the client with the possibility of storing the information described in Regulations 28 to 30 by means of its website. 32. Language of the information Information that the company is required to provide to the client according to this chapter will be written in Hebrew and will be written as clearly and as simply as possible, unless the client has requested that he receive the information in a different language and the company has agreed to this; the use of the English language will be permitted in cases where accepted professional terms are being used and only on the condition that these professional terms are accompanied by a simple and clear explanation in Hebrew. 33. Chapter 7: Instructions for the Storage of Documents (a) The company will save documents related to its business, which will include the following: (1) A document related to a trade carried out by the company in a financial instrument; (2) Information that the company is required to record according to Chapter 11; (3) A document containing an instruction, authorization or confirmation that the company has received from a client; (4) A document that constitutes documentation according to the regulations; (5) Procedures; (6) The framework agreement; (7) Publications and documents created as part of the communication with the client, as defined in Chapter 9. (b) The documents will be saved for a period of at least seven years from the time the document was created or when it was received by the company, on the condition that the agreements between the company and the client will be saved for the duration of the company-client relationship and for at least seven years after the end of that relationship. 34. Procedures The company will adopt procedures that specify how documents will be saved in order to guarantee their preservation, their protection against damage, the access to them, client confidentiality, the possibility of backing up and retrieving of the information and the ability to locate documents if the need arises. 35. Client access The client will have the right to examine any document that is related to activity in his accounts with the company and to obtain a copy of them, within a reasonable amount of time from the request and not more than one month after the request is made by the client. 36. Storage of documents within the area of jurisdiction The documents will be stored within the area of jurisdiction of the State of Israel; the Authority has the right to exempt a company from this instruction if it judges this to be the correct action in the circumstances.

19 Chapter 8: Suitability of the Client to Activity in the Trading Platform 37. Suitability and inquiry (a) Before providing service to the client, the company will inquire with the client whether activity in the trading platform is suitable to the client and also whether the client is a minor (in this chapter: "inquiry"). (b) The scope and character of the inquiry will be determined by the nature and complexity of the financial instruments which the client will be trading in and the risks implicit in them; in order to carry out this clarification, the company will make use of questionnaires and tests that will provide the company with an indication of the client's understanding of the aforementioned risks; in this context, the company has the right to take the following into account: (1) The client's education or professional training and also his present or past occupation; (2) The client's experience, including the types of his past activity in the capital market and the scope and frequency of trades in which he was involved. (c) With respect to the results of the clarification mentioned in subregulation (b), the company will determine whether the client is suited to trade in the trading platform. (d) If the client is found not to be suited to trade in the trading platform, the company will warn the client of his unsuitability in writing; in this context, "in writing" will include by means of electronic mail. (e) If the client requests to trade in the trading platform despite the warning mentioned in subregulation (d), the company will consider whether to allow the client to trade in the trading platform, while taking the circumstances into account. 38. Documentation The company will document the process of determining the suitability of each client and its results. 39. Definitions for Chapter 9 In this chapter Chapter 9: Publicizing and Marketing the Trading Platform "Publicity" publicizing by word of mouth, in writing, in print or by electronic means which is aimed at or accessible to the public, including indirect publicity; and including visual means of marketing the company or the trading platform; "Indirect publicity" Publicity not of the company or the trading platform that it operates, whose goal is, among others, to market the company or the areas that it operates in; "Communication with clients" including information provided to the client by the company. 40. Publicity and communication with clients (a) The communication between the company and the client will not be in any way misleading or intended to impose unfair pressure. (b) When the company does communicate with its clients: (1) The name of the company will be presented in a clear manner;

20 (2) It will not be mentioned or implied that the activity in the trading platform is suitable for everyone; (3) Warnings and information on the service will be presented clearly and with emphasis. (c) The following instructions will apply to the publicity: (1) Every publication will include the following warning: "1. The activity in the trading platform requires skill, knowledge and understanding of the risk and is not suitable for everyone; 2. Leveraged activity involves a real risk of losing all of one's investment within a short period of time; 3. The company operating this trading platform operates as counterparty to the trading with you and therefore it is the seller when you buy and the buyer when you sell." (2) The instructions of clause (1) will not apply to the name of the company and its trademarks, the company's stationery, stickers and also marketing or other advertising products. (d) If the Chairman or an employee he has authorized for this purpose in writing is convinced that there will be no harm to clients, he has the right to allow the company not to include the warnings listed in subregulation (c)(1), whether all of them or only some of them, according to the circumstances. (e) If the information in the publication is based on an opinion rather than on facts, this will be stated explicitly. (f) A publication will not mention a client's profit from activity in the trading platform. (g) In communication with the clients that presents discounts and benefits in the rates offered to the client: (1) The date on which the aforementioned discount or benefit expires will be stated; (2) The existence of additional fees that apply to the customer and which are set out in the original agreement will be mentioned. 41. Confirmation of the publicity material The CEO of the company or the aforementioned officer, even if his title is different, or a different senior officer whom the CEO has authorized for this purpose, will approve the advertising material before it is released. 42. Mention of the Authority in the publication Publicity material that mentions the Israel Securities Authority will include the following warning: "The approval given by the Israel Securities Authority for management of the trading platform does not constitute confirmation of the quality of trade in the trading platform or in financial instruments traded in the trading platform or confirmation that it is a safe or recommended investment channel." 43. Limiting the benefits to the clients The company will not offer the client payment, a gift or a benefit related to its activity in the trading platform; a discount or exemption in fees and rates or a similar debit that applies to the client will not be viewed as a payment, gift or benefit, as mentioned.

21 Chapter 10: Reports to the Authority Article 1: General Instructions 44. Submitting a report (a) A report submitted to the Authority will include the details required by these regulations and additional details required in order to understand the issue or event. (b) Regulation 5b of the Immediate Periodic Reports Regulations will apply to an opinion that is attached to a report submitted to the Authority. (c) The company is permitted to include the details required in the periodic report by means of a referral to other detailed reports that were submitted by the company and which also include details required in a periodic report or in other detailed reports by means of a referral to a quarterly report, to a monthly report or to an immediate report submitted by the company, as published by means of an electronic report (in this regulation a different report) and the following instructions will apply: (1) Information will not be included by means of a referral to a quarterly report or a monthly report if more than four years have passed since it was submitted; (2) Information will not be included in the form of a referral to an immediate report that was submitted by the company if more than four years have passed since it was submitted; (3) Information will not be included in the form of a referral to a different report in which the information appears in the form of a referral; (4) Information will not be included in the form of a referral if this is likely to mislead or lead to a lack of clarity; (5) Information will not be included in the form of a referral to a report that has not been submitted in accordance with the law; (6) The referral will be made explicitly and will state the type of report to which the referral is being made, the date of that report and the matter to which the referral is being made, including an explicit mention of the fact that information is being presented by means of a referral; (7) Any development or update of information presented by means of a referral will be reported, if required; (8) If the information being presented in the form of a referral is of the type that requires prior consent in order to be included in the report, then the renewed consent will also be submitted for its inclusion in the current report in the form of a referral. 45. Confirmation and signature of the report (a) The report will include the date of the signature on it; beside each signature will appear the name of the signatory and his function. (b) The immediate reports mentioned in article 2 and the monthly reports mentioned in article 3 of this chapter will be signed on behalf of the company by the company s authorized signatories, on the condition that their contents are approved by one of the following: (1) The Chairman of the Board; (2) The CEO; (3) The most senior financial officer; (4) Someone acting in the above positions even if they hold a different title.

22 (c) The Board of Directors of the company will approve the annual reports and other reports mentioned in Article 5 of this chapter and the quarterly reports mentioned in Article 4 of this chapter and the reports will be signed on behalf of the company by all of the following or by those filling these position even if they hold a different title: (1) The Chairman of the Board; (2) The CEO; (3) The most senior financial officer. 46. The language of the report The report will be written in Hebrew and will be written as simply and as clearly as possible. 47. Electronic reporting A report, notification and any other document that is to be submitted to the Authority according to these regulations will be submitted according to the Securities Regulations (Electronic Signing and Reporting) (hereafter: Electronic Signing and Reporting Regulations). 48. Publishing of reports and announcements The reports and details listed below will be published on the distribution website of the Authority and in addition on the website of the company; in this regulation, distribution website is the Internet site of the Authority which is accessible to the public and where reports from reporting entities are displayed and whose address is (1) Immediate reports according to Regulations 54, 57, 58, 61, 62, 63 and 66; (2) Immediate reports according to Regulation 51 and 56 will be published if the information will or may have a significant effect on the company s clients or on the trading in the trading platform; (3) Immediate reports according to Regulation 53 will be published if they relate to the bringing of charges or conviction for a crime; other reports according to this regulation will be published if the information will or may have a significant effect on the company s clients or on trading in the trading platform; (4) A demand for payment according to paragraph 52AA(b) of the Law; (5) A decision to utilize means of enforcement according to paragraph 52HHH(d) of the Law; (6) An arrangement that refrains from initiating proceedings or a stay of proceedings according to paragraph 54C(c)of the Law; (7) The details listed in Regulation 75(e)(2). (8) The details listed below from within the additional details report according to Regulation 75(g): the name of the company and its identity number, commercial name, place of incorporation, address of the applicant s registered office, its business management address, telephone numbers, facsimile numbers and electronic mail and if the applicant is a foreign entity then the name and address of the individual in Israel who is authorized to receive judicial document and notifications for the applicant, details of the applicant s auditor, the name of each of the company s substitute directors and details of any criminal convictions, The name of all of the applicant's 7 Collection of Regulations 5763; 5771, p. 296.

23 senior officers and whether they have a stake in the applicant and also details of any criminal conviction they may have, details of controlling shareholders and a description of the applicant s ownership chart, the country of citizenship or incorporation of the controlling shareholders and whether they are subject to regulation and also details of any criminal convictions they may have, details of the identity of the custodian, the bank or financial institution outside of Israel where the clients' funds are deposited, and the insurance purchased by the company will be described, as well as its coverage and scope; (9) The details listed in Regulation 76(4). 49. reports and amendments on demand (a) The company must submit an immediate report on a matter or event according to a special request from the Chairman of the Authority or an employee of the Authority he has authorized for this purpose in writing by the date specified in the request and on the condition that the date specified in the request is not less than that specified in Regulation 50(b) if in his opinion it has or may have a significant effect on the company, on its clients or on trading in the trading platform. (b) The company is obligated, in response to a demand by the Chairman of the Authority or an employee he has authorized for this purposes to: (1) Submit in writing to the Authority by the date specified in the request an explanation, information and documents relating to details included in a report or an announcement according to these regulations; (2) Submit an amended report or announcement that was submitted according to these regulations, by the date specified in the request if it is realized that a report or announcement to be submitted is not as required according to these regulations. (c) The Chairman of the Authority has the right to instruct the company, after it has been given an opportunity to present its claims, to submit the following within a specified period: (1) A report that will include an opinion, in addition to the opinion included in the submitted report, if it realized that the aforementioned report is not as required or the details provided according to subparagraph (b) require that the aforementioned instructions be issued; (2) Financial reports, an opinion or a survey by the accountant who audited or reviewed them, or of a different accountant, in place of those included in the report submitted to the Authority, if in its opinion they were not prepared according to accepted accounting standards and accepted reporting principles and which do not accurately reflect, according to the aforementioned standards and principles, the company's business situation; (3) To publish a report that it submitted according to Regulation 49(a) or parts of it as instructed, and on the condition that the report is not included within the reports that are not to be published according to these regulations. (d) If the Chairman of the Authority or an employee of the Authority he has authorized for this purpose is convinced that the company is unable to submit a report or announcement according to this Chapter by the date specified in the regulation, he has the right to extend the period in which they are to be submitted.

24 (e) If the Chairman of the Authority feels that it is necessary to protect the interests of the clients, he or an employee he has authorized for this purpose has the right to require the company to submit data to the Authority as specified in Chapter 11 as will be instructed. Article 2: Immediate Reports 50. The immediate report and the date on which it is to be submitted (a) A report according to this article and also immediate reports that the company is required to submit according to the Law will be submitted as immediate reports according to this Article. (b) The deadline for submitting an immediate report is not later than 17:00 on the first business day following the date on which the company first becomes aware that the event has occurred; in this context, "the company first becomes aware that the event has occurred" when one of the following first becomes aware that the event has occurred: the company's Chairman of the Board, its CEO, its principal business manager, the most senior financial officeholder, the secretary of the company, or anyone acting in these capacities in the company, even if they hold a different title. (c) The report will specify the date and time on which the reported event occurred if it is known to the company, and the date and time at which the company first became aware that the reported event has occurred. 51. An event or matter with a significant influence The company will report on any event or matter that has or is likely to have a significant influence on the company, on the company's clients or on trading in the trading platform. 52. A suspicion of fraud by an employee of the company If there arises a reasonable suspicion of fraud by an employee of the company involving the funds of the company or the funds of the company's clients, the fraud will be mentioned in the report, as well as the facts relating to this matter; in this Regulation, "fraud" one of the violations listed in Article 1, 6, and 7 of Chapter 11 of the Penal Code. 53. Notification according to paragraph 44BB A notification according to paragraph 44BB of the Law will be submitted as an immediate report according to the instructions of this Article. 54. A change in the details of the company (a) If the name of the company or its business name as stated in Regulation 2(a)(8)(b) have been changed, a report will be submitted regarded the details of the change. (b) If the company's address. telephone and fax numbers or electronic mail address or the address of the company's website have been changed, the details of the change will be included in the report. 55. Management of the information technology and user interface If a material event occurs that is related to the management of information technology, a report will be submitted regarding the details of the event.

25 56. Notification to an insurance company If a notice has been submitted to an insurance company with regard to insurance arranged by the company according to paragraph 44xiii(b)(5) of the Law, the content of the notice and the date on which it was submitted will be reported. 57. Controlling shareholder (a) If a change has occurred in the scope or manner of holdings of the controlling shareholder in the company, the company will submit a report describing the change and the date on which it occurred and a report that lists the holdings of the controlling shareholder after the change. (b) If an individual has become the controlling shareholder in the company without receiving a permit from the Authority, the company will report this to the Authority and will also submit a report describing the holdings of the controlling shareholder after the change. 58. Appointment to office or termination of office (a) If an individual is no longer serving as the Chairman of the Board, a director, the CEO, the chief business manager, the most senior financial officer or an individual acting in any of the aforementioned capacities even if he holds a different title, details regarding the date of the termination of office and whether according to the knowledge of the company the termination of office involved circumstances that require notifying the Authority or the company's clients will be submitted; in this case, the circumstances will be described. (b) If an individual has been appointed as Chairman of the Board, director, CEO, chief business manager, the most senior financial officer or an individual acting in the aforementioned capacities even if he holds a different title, the details listed in Regulation 26 or 26i of the Periodic and Immediate Reporting Regulations, according to the circumstances, and also details regarding which the company or the owner of the Control Permit is required to submit a notification to the Authority as stated in paragraph 44BB(a) of the Law with respect to that individual will be submitted. (c) If an individual who holds a senior position in the company which is not mentioned in subregulation (a) ceases to serve in that position, and the termination of the office involves circumstances that are to be brought to the attention of the Authority or the company's clients, then details of the date of the termination and the circumstances will be submitted. 59. Lack of reconciliation If a material deviation is found during the reconciliation of the assets, contracts and funds of the company s clients or the company has not received a special report from the auditor regarding the daily reconciliations of clients' funds as stated in Regulation 20, the company will report this to the Authority and the report will include details of the nature and scope of the lack of reconciliation. 60. Data that is included in the monthly report and requirements according to paragraph 44M(b)(5) of the Law (a) If a material change has occurred in the information included in the reports according to Regulations 71 to 73, the company will report this change to the Authority, including

26 whether the company has met the requirements according to paragraph 44M(b)(5) of the Law during the reporting period from the latest monthly report until the reporting date. (b) If the company has deviated from the requirements according to Paragraph 44M(b)(5) of the Law, the company will report to the Authority the date starting from which it deviated from these requirements, including a description of the nature and scope of the deviation. 61. Material changes in the framework agreement A company which has the right according to the agreement with the client to change the conditions of the framework agreement will report any material change in Chapters 1 to 5 of the agreement or any change not in those chapters for which the consent of the client was not obtained, including the date of the change, two weeks prior to the change, and the report will include the following details (1) The nature of the change and its text; (2) The date the change will go into effect; (3) The full framework agreement will be attached and the implemented change will be marked; (4) The full and revised framework agreement without the change marked will be attached. 62. A material event regarding the funds of the client and regarding the company's credit risk (a) If the company knows of a material event regarding the holdings of client's funds with the company, with a bank or a financial institution outside of Israel, according to the circumstances, the company will report this to the Authority; as part of the aforementioned, the company will report a decision to start doing business with a new bank or financial institution outside of Israel and the report will include its name, its rating if it has one, the country in which it incorporated and the date on which the company started doing business with it. (b) If the company has decided to do business with a new and significant source of credit risk, which is not a client in the trading platform, the report will include its name, the rating of the credit risk source if there is one, the credit risk source's country of incorporation, the date on which the activity began and the type of activity involved. (c) If a decision was made to change the policy governing exposure to credit risk in the trading platform, then the report will state the exposure to credit risk policy prior to the change, the revised exposure to credit risk policy and the date on which the change went into effect. (d) If a material source of credit that the trading platform is exposed to has been reclassified from a higher risk group to a lower risk group, the change will be described. 63. Appointment and replacement of an auditor (a) if the company's auditor is no longer serving in that capacity, the date from which this went into effect will be specified; if to the best of the company's knowledge this event involved circumstances that should be brought to the attention of the Authority or the company's clients, then the aforementioned circumstances will be described. (b) If an individual has been appointed as the auditor of the company, then his name, the address of his office and the date of his appointment will be submitted.

27 64. Deviation from the price-setting mechanism If the company has quoted a price to the client that deviates from the independent pricesetting mechanism that is derived from data that is not under the control of the company and is anchored in the bylaws of the company, and on the condition that it has been anchored in the aforementioned bylaws, the detailed report will describe the deviation, the date it occurred, its scope and the reasons for it, and with respect to trades that were carried out at a price determined as a deviation from the independent price-setting mechanism during a period in which the deviation occurred, the number of profitable trades by clients and the number of losing trades by clients during this period will be specified and also the total profits of clients in the profitable trades and the total losses of clients in the losing trades during the aforementioned period; with regard to the calculation of the profit or loss of the trade, the number of profitable trades, and the number of losing trades, the instructions of Regulation 69 will apply with the necessary modifications. 65. Deviation from trading restrictions If the company has deviated from the restrictions on trade specified in the bylaws and on the condition that it has specified the aforementioned trade restrictions in the bylaws with respect to the hedging of risk, the detailed report will describe the deviation, its date, its scope and the reasons for it. 66. A change in the scope of coverage or in the area of insurance coverage If a change has been made in the scope of coverage or in the area of coverage of the insurance arranged by the company according to Regulation 88, the detailed report will describe the change, its date and the reasons for it. 67. Definitions for Article 3 In this article Article 3: Monthly Reports "Fair risk value" according to its meaning in item (2)(g) of the Second Schedule of the Periodic and Immediate Reports Regulations. 68. Monthly reports (a) Not later than 10 business days after the end of the previous month, the company will submit to the Authority a monthly report as described in this article, which includes data on the activity carried out during the month preceding the reporting date. (b) Notwithstanding what is stated in subregulation (a), a monthly report that is submitted in the same month in which quarterly reports are submitted according to Regulation 75(b) will not include items specified in Regulations 69 to 70 and in the month in which additional reports are submitted as stated in Regulation 76 they will not include items specified in Regulations 69 to Report on profitable and non-profitable clients (a) A report will be submitted which contains a list of the losing clients and the profiting clients (hereafter: report on profitable and non-profitable clients); the data in the report

28 will be presented in table form and alongside the data will appear data published in the previous monthly report; (b) The report on profitable and non-profitable clients will include the following data; (1) The number of clients who were active during the month; (2) The number of active clients who lost money and their proportion of the total number of active clients during the month; (3) The number of active clients who made a profit and their proportion of the total number of active clients during the month; (4) The number of active clients who did not profit or lose and their proportion of the total number of active clients during the month. (c) In order to calculate a client's profit or loss, the following should be taken into account: (1) Realized profits less realized losses, fees and all other expenses incurred by the client; in this context, a deposit made by a client during the month will not be calculated as realized profit and a withdrawal carried out by a client during the month will not be calculated as realized loss. (2) Interest payments and other income owed to the client. (d) The number of clients will not include a client according to Regulation 4(e) (hereafter: a sophisticated client), nor related parties or stakeholders of the company. (e) In the context of this regulation "Losing clients" clients for whom the aforementioned calculation yields a result that is less than zero; "Profiting clients" clients for whom the aforementioned calculation yields a result that is greater than zero; "Clients who are neither profiting nor losing" clients for whom the aforementioned calculation yields a result that is equal to zero; "Active client" a client who has closed at least one open trade during the month. 70. Activity report (a) A report will be submitted that contains a list of the company's activities (hereafter: the activity report); the data in the report will be presented in the form of a table and alongside the data will appear the data published in the previous monthly report. (b) The following data will be presented in the report - (1) The number of clients who deposited funds with the company for the first time and their proportion of the total number of the company's clients who were registered with the company during the month; (2) The number of clients who withdrew all of their funds with the company or that closed their accounts with the company and their proportion of the company's total number of clients who were registered with the company during the month; (3) The number of active clients during the past month and their proportion of the total number of clients that were registered with the company during the month; in this context, an "active client" a client who maintains an open trade; (4) The total amount of client funds in new shekels, as of the last day of the month, of clients who deposited funds with the company for the first time during that month and their proportion of the total client funds held with the company;

29 (5) Total client funds in new shekels, as of the last day of the month, of clients who operated in the trading platform during the past month and their proportion within the total client funds held with the company; (6) The total collateral of clients in new shekels as of the last day of the month and its proportion of total client funds held with the company; (7) Total collateral required from clients due to the trades mentioned in Regulation 4 which the clients allocate to the last day of the month and its proportion of the total funds of clients held with the company; (8) The average number of trades per client; (9) Details of a trade that the company cancelled or changed and the reason for the aforementioned cancellation or change; (10) The number of trades not initiated by the client. (c) The data listed in items (1) to (7) of subregulation (b) will be reported with a distinction being made between sophisticated clients and the rest of the clients. 71. Credit Risk Report (a) A report will be presented that provides a description of the company's credit risks (in this regulation a credit risks report). (b) Regarding a material source of credit risk and any other source of credit risk that is not a client, the following data as of the end of the month will be submitted: (1) The name of the credit risk source as long as it is not a client; (2) The rating of the credit risk source, if there is one, and the name of the rating agency; it will be stated whether there has been a decline in its rating since the last reporting date; in the context of this clause, "the rating of the credit risk source" with regard to a body that is rated by an Israeli rating agency the lowest rating published by the Israeli rating agency; with regard to a body rated by an international rating agency the lowest given by the international rating agency; (3) The CDS prices for a period of one year, if they are available, for the credit risk source and of any corporation that controls it, whether directly or indirectly; it will be stated whether there has been an increase of more than 5% in the CDS price within the year since the last reporting date; (4) The share prices, if they are available, of the credit risk source and of every corporation that controls it, whether directly or indirectly; it will be stated whether there has been a decline of more than 5% in the share price since the last reporting date; (5) If the exposure to the credit risk is due to the deposit of cash, the type of deposit in which the money is deposited, including the indexation and interest rate terms, and also the period of the deposit in which the money is deposited and the period of the deposit will be stated; if the deposits are for a period of over three months, the total of all the deposits for a period of over three months due to each aforementioned source of credit risk will be stated separately; (6) If there is an exposure to a number of sources of credit risk and these sources are related entities, then in addition the total value of the exposure to the credit risk components for all the groups will also be stated; in this context, a "related entity" as defined in the Securities Regulations (underwriting), ; 8 8 Collection of Regulations 5767, p. 661.

30 (7) The country of incorporation of the credit risk source, if it is a corporation, and its lowest rating published by an international rating agency, if there is one; if the source of credit risk is a regulated entity, these details will also be provided for the country in which the regulator is located; (c) For each of the company's credit risk components, the total replacement value as defined in regulation 86(e) in aggregate and also separately for each material source of credit risk and also any other source of credit risk that is not a client; the data will be submitted at the end of the month and will be presented in table form and alongside the data will be presented the data published in the previous monthly report. (d) The data in this regulation will be submitted with the necessary changes also with regard to the funds of clients that are deposited with a bank or a financial institution outside of Israel. 72. The Market Risks Report (a) A report will be submitted which describes the company's market risks (hereafter: the market risks report). (b) The market risk report will include the following data as of the end of the month: (1) Sensitivity tests regarding the fair value of the market risk components as the result of changes in the prices of the underlying assets, according to the format specified in Regulation 2vi of the Second Schedule of the Periodic and Immediate Reports Regulations with the necessary changes; the data will be presented separately for assets, liabilities and market risk components that are not assets or liabilities and the aggregate amounts of each of the aforementioned; in the calculation of exposure, the company will take into consideration, among other things, trades not initiated by the client and future instructions and any conditions that automatically induce the company to act; notwithstanding what is stated in Regulation 2vi(a)(4)(a) of the Second Schedule of the Immediate and Periodic Reports Regulations, the company will implement at least twelve sensitivity tests as result of changes in market factors of one-half of a percent, one percent, one and a half percent, two percent, five percent and ten percent, both upwards and downwards; (2) The value in new shekels of the fair risk value of each of the components of the company's market risk and also on an aggregate level, according to a model that reflects the accepted method of measuring exposure to market risk; in the calculation of exposure, the company should take into consideration trades not initiated by the client and future instructions and any condition of a market risk component that will require the company to close or open a trade; in places where the model for calculating this value and the guidelines that were used differ from those presented in the periodic report, this will be stated explicitly and will be accompanied by a detailed explanation; (3) Stress scenarios for the components of the company's market risk, which were calculated according to models that reflect the accepted method of measuring exposure to market risk; this value will be presented for each of the components of market risk separately and also in the aggregate; in addition, the assumptions of the model will be presented; (4) Explanations will be provided for clauses (1) to (3) and the company will relate to the implications for the stability of the company and the measures that have been taken or are planned to be taken in order to maintain the company's stability.

31 73. Report of the calculated allocations against risk and regulatory equity capital A report will be submitted at the end of the month which will provide a description of the method for calculating the allocations against market risk, credit risk, operational risk and regulatory equity capital, as they are defined in Chapter 12 of the Regulations, arranged according to the Fourth Schedule (hereafter: the report of the calculated allocations against risk and regulatory equity capital); in places where the company knows that the calculation of the allocations as of the end of the month does not reflect the allocations during the course of the month, additional data will be presented that reflect the calculation of the allocations during the month. 74. Quarterly reports Article 4: Quarterly Reports (a) The company will submit to the Authority a quarterly report as defined in Regulation 38 of the Periodic and Immediate Reports Regulations and will attach to it a report as mentioned in subregulation (e); the instructions of Chapter 4 and Regulation 4(c) of the Periodic and Immediate Reports Regulations will apply to the aforementioned quarterly report, on the condition that notwithstanding what is stated in Regulation 46 of the Periodic and Immediate Reports Regulations the quarterly report will be signed on behalf of the company according to Regulation 45(c); the quarterly report will have attached to it a list of the senior officers in the company, with details of appointments and termination of office of senior officers during the reporting period. (b) Not later than 10 business days after the end of the quarter, the company will submit reports as specified in subregulations (c) and (d); the data in the aforementioned reports will be submitted for the past quarter, the quarter previous to that and the past month and will be presented in table form. (c) The company will present a report which provides a list of the profitable and nonprofitable clients as stated in Regulation 69, with respect to each of the four quarters preceding the date for submitting the report. (d) The company will submit a report containing a description of activity, as specified in Regulation 70, with the word "month" replaced by "quarter"; the data specified in Regulation 70(8) to (10) will be submitted separately for each underlying asset, with a distinction made between client contracts and client assets. (e) The company will submit a report of the calculated allocations against risk and regulatory equity capital, as specified in Regulation 7 (hereafter in this subregulation: the report), as of the date of the quarterly report and reviewed by the auditor; attached to the report will be the review of the auditor, signed by him and bearing the date of the signature; the review will include the opinion of the auditor with respect to the preparation of the report according to the requirements of Regulation 73 and Chapter 12, and also his consent to include the review in the report, including the date or period to which the report that the aforementioned consent applies to will be submitted. 75. Annual reports Article 5: Annual Reports (a) The company will submit to the Authority a periodic report as stated in Regulation 7 of the Periodic and Immediate Reports Regulations (hereafter: periodic report); the

32 instructions of chapter 2 and Regulation 4(c) of the Periodic and Immediate Reports Regulations will apply to the periodic report. (b) The periodic report will be signed on behalf of the company according to Regulation 45(c). (c) Notwithstanding what is stated in Regulation 8(b) of the Periodic and Immediate Reports Regulations, the periodic report will not include a chapter describing the corporation's business. (d) The instructions of regulations 8a, 10(b)(1)(g), (4), (6), (9), (9a), (11), (13), and (14), 10(b)(2)(i), 10c, 14, 20, 21a, 25a, 26, 26a, 26b and 27 of the Periodic and Immediate Reports Regulations will not apply. (e) In addition to what is specified in Regulation 10 of the Periodic and Immediate Reports Regulations (1) The Board of Directors report will include explanations of the following : (a) A concise description of the company's business and the business environment in which it operates; (b) The effect of external factors on the company; (2) The Board of Directors report will include a discussion of the risk factors in the company's activity, in the format specified in item 39 of the First Schedule according to Regulation 44 of the Prospectus Details Regulations. (f) To the periodic report will be attached a report of the calculated allocations against risk and regulatory equity capital, as specified in Regulation 73 (hereafter in this clause: the report), as of the date of the periodic report and audited by the auditor; the report will have attached to it an opinion of the auditor, signed by him and bearing the date of his signature; the opinion will also include confirmation that the report was prepared according to the requirements of Regulation 73 and Chapter 12, and also his consent to include the opinion in the report, including the date or period to which the report to which the aforementioned consent applies will be submitted to the Authority. (g) To the periodic report will be attached a report with additional details as specified in Regulation 2(a)(8), with the word "company" replacing "applicant", and in every place where the company is required to provide forecasted data regarding the period following the receipt of the license, it will provide data for the past year. (h) To the annual report will be attached a list of senior officers in the company, with a list of appointments and terminations of office of senior officers during the period of the report. 76. Additional Reports The company will submit the reports mentioned in clause (1) to (4) below, not later than 10 business days after the end of every year; the data in the aforementioned reports will be presented in table form for the past year, for the past month and for the year preceding the year for which the report is being submitted: (1) A quarterly report of profitable and non-profitable clients, as described in Regulation 74(c). (2) A report on activity, as described in Regulation 74(d), with the word "quarter" replaced by "year"; the data in the report on activity will be presented for the past year and alongside them will appear data published in the previous annual report. (3) A credit risk report, as described in Regulation 71, with the word "month" replaced by "year"; in addition, for each material source of credit risk, the following details will be attached:

33 (a) A graph of CDS prices during the preceding 12 months for the source of credit risk and for the corporation that controls it, whether directly or indirectly, if they are available; the graph will be presented with a comparative graph of CDS prices of five leading banks that have a CDS price which is lower than the average for comparable banks; (b) The highest and lowest share price during the last 12 months for the source of credit risk and for the corporation that controls it, whether directly or indirectly, if it is available and if these are corporations whose shares are traded on the Tel Aviv Stock Exchange, a stock exchange outside of Israel or in a regulated market; (c) Graph of the share price during the previous 12 months of the source of credit risk and of the corporation that controls it, whether directly or indirectly, if it is available and if they are corporations whose shares are traded on the Tel Aviv Stock Exchange, on a stock exchange outside of Israel or in a regulated market; (4) The company's credit risk management policy, as approved by the Board of Directors, will be described. 77. Adjustments and monitoring With respect to the auditor's report attached according to Regulation 9b of the Periodic and Immediate Reports Regulations, the monitoring determined by the company with respect to the adjustment of the client's assets, the client contracts and the client's funds as stated in Regulation 20 will be viewed as monitoring of the financial reporting and disclosure. 78. Recording of trades Chapter 11: Recording of Trades, Instructions and Quotes The company will record each trade carried out by a client in the trading platform, including the following details: (1) Identifying details of the client and the agent for whom the trade was executed; (2) The date the trade was carried out; (3) The date and time of the instruction given by the client; (4) The type of trade, including a new trade, a rollover or a trade not initiated by the client; (5) Buy or sell; (6) Name of the financial instrument, its price and its quantity; (7) The price and quantity of the trade; (8) If the client was charged a fee or some other charge for carrying out the trade the amount of the fee or charge according to the circumstance and not including a quote spread; (9) Any other significant detail of the executed trade ; (10) If there has been a change in the trade or its details from the trading instruction given by the client, then the change and the reason for it will be stated; (11) If the trade was not initiated by the client, the reasons for the aforementioned trade will be provided. 79. Recording of an immediate trading instruction that was not executed immediately

34 If the client gave an instruction for an immediate trade and the trade was not executed immediately, the company will record the following details: (1) Identifying details of the client who gave the instruction; (2) The date on which the instruction was given; (3) Items (3) to (6) of Regulation 78 where the word "trade" will replace the word "instruction". (4) The reason that the instruction was not carried out. 80. Recording of an instruction for a future trade If a client has given an instruction for a future trade, the company will record the following details: (1) Items (1) to (3) in Regulation 79; (2) The conditions under which the client requests that the trade be executed; (3) The amount of the fee if the client has been charged a fee to give the instruction. 81. Recording of quotes The company will record all buy and sell price quotes for a financial instrument and also the corresponding date. 82. The form of the record The records according to Regulations 78 to 81 will be in writing, computerized or in some other form, on the condition that they be created immediately after an instruction is given, a trade is executed or a quote is provided, according to the circumstances, and in a manner that can be stored and retrieved; the records will include the date they were created. Chapter 12: Minimum Equity Capital, Liquid Assets and Insurance 83. Definitions in Chapter 12 In this chapter "Stock exchange in Israel" as defined by the law; "Stock exchange outside of Israel" a stock exchange that is not a stock exchange in Israel, and which has received approval from an entity that is authorized to provide it in the country in which it operates; " Margin" funds of a client on the condition that they are deposited with the company, and the company has the right to use them to cover the client's liabilities towards the company and excluding funds transferred by the client to the company by means of a credit card, bank transfer, check or other means of payment and which have not yet been cleared; "A bank in Israel" a bank according to its meaning in the Banking Law; "A bank outside of Israel" as defined in the Joint Trust Investment Law; "Financial reports", "liabilities", "report on the financial situation", "assets" and "profit" according to their meaning according to generally accepted accounting principles;

35 "Allocation against exposure to credit risk" the amount the company is required to allocate due to exposure to calculated credit risk as specified in Regulation 86; "Allocation against exposure to market risk" the amount the company is required to allocated against exposure to calculated market risk as specified in Regulation 85; "Allocation against exposure to operational risk" the amount the company is required to allocate against exposure to operational risk as specified in Regulation 87; "International rating agency" one of the following: (1) Fitch Investors Service (hereafter: Fitch); (2) Moody's Investor Service (hereafter: Moody's); (3) Standard & Poor's Corporation (hereafter: S&P); "Israeli rating agency": (1) Maalot The Israeli Company for Rating of Securities Ltd. (hereafter: Maalot); (2) Midrug Ltd. (hereafter: Midrug); "Exposure to credit risk" exposure to default on the liability of a counterparty; "Exposure to market risk" exposure to changes in market prices; "Financial intermediary" an entity whose business is the sale or purchase of securities for others according to their instructions; "Source of credit risk" a counterparty on account of whom there is exposure to credit risk due to a credit risk component; "Reverse positions" a long position and a short position; "A related party" anyone who is part of a group, as defined in Regulation 1, of which the company is a member and excluding someone who is under supervision with respect to riskbased equity capital requirements that are comparable to those determined in these regulations; "Credit risk component" an asset or activity of the company or a financial instrument that the company is holding or is a party to and due to which exposure to credit risk may arise for the company; "Currency risk component" a currency or gold, a liability in a currency or in gold and any financial instrument whose value is derived from the value of a currency or gold or an index of the value of a group of currencies; "Share risk component" a share, liability in a share and any financial instrument whose value is derived from a share's value or an index of the value of a group of shares; "General market risk component" a financial instrument that the company holds or is a party to and due to which exposure to market risk may arise for the company; "Currency market risk component" A currency risk component that the company holds or is a party to and due to which exposure to market risk may arise for the company;

36 "Share market risk component" A share risk component that the company holds or is a party to and due to which exposure to market risk may arise for the company; "Commodity-based market risk component" a commodity-based risk component that the company holds or is a party to and due to which exposure to market risk may arise for the company; "interest-rate-based market risk component" an interest-rate-based risk component, which the company holds or is a party to and due to which exposure to market risk may arise for the company; "Interest-rate-based risk component" bonds, liabilities in bonds and any financial instrument whose value is derived from the interest rate or bond values; "Commodity-based risk component" a commodity, liability in a commodity or any financial instrument whose value is derived from the value of a commodity or from an index of the value of a group of commodities; in this context, "commodity" excludes gold. 84. Equity capital (a) The company will at all times possess adequate capital in order to support the risks implicit in its business and also will develop and use techniques for risk management in order to monitor and manage risk. (b) The company will at all times possess regulatory equity capital that will not fall below the largest of the following amounts: (1) The total allocation against exposure to market risk, credit risk and operational risk; (2) Eight hundred thousand new shekels for a limited company, one and a half million new shekels for a company that simultaneous with each trade in a financial instrument carries out a reverse trade with a liquidity supplier under the same terms and both trades fully offset each other, such that the company is not exposed to market risk due to them at any market price, or four million new shekels for a company that is not a limited company. (c) The amounts specified in subregulation (b)(2), will be updated on the 1 st of January of each year (hereafter: the day of the update) according to the rate of change in the index from the latest index published before the update relative to the base index and will be rounded to the nearest 1000 new shekels; (d) The Chairman of the Authority or someone he has authorized for this purpose in writing will issue a notification in Reshumot of changes in the amounts mentioned in this regulation. (e) In this regulation "Regulatory equity capital" according to its meaning in the Second Schedule; "Price index" the Consumer Price Index which is published by the Central Bureau of Statistics; "Base index" the most recently published index prior to the latest update or prior to the day of commencement, according to the later of the two. 85. Allocation against market risk

37 (a) The company is required to allocate 10 percent of the sum of the following against exposure to market risk: (1) One hundred percent of the calculated value of all market risk share components; (2) Seventy five percent of the total calculated value of all interest-rate-dependent market risk components; (3) Seventy percent of the calculated value of all currency market risk components; (4) One hundred and sixty percent of the calculated value of all commodity-dependent market risk components; (5) Two hundred percent of the calculated value of all general market risk components, to which clauses (1) to (4) do not apply; (6) Twenty percent of the total interest rate differences. (b) In subregulation (a) (1) A market risk component whose underlying asset is a ratio between two currencies or a ratio between the exchange rates of those currencies or a ratio between two other underlying assets, will be viewed as two market risk components and the underlying asset of one of them will be the underlying asset that the company holds in a long position and the underlying asset of the other will be the underlying asset that the company holds in the short position; (2) If more than one clause from among the clauses in subregulation (a) applies to a market risk component, the calculated value of the market risk component will be included in the calculation of each of them; (3) In the calculation of the total calculated value of all risk components in each of the clauses in subregulation (a), the company has the right to offset reverse positions against risk components that have the same underlying asset and on the condition that they relate to financial instruments with identical conditions; However, the company does not have the right to offset positions that relate to a financial instrument for which the other party is a related party against reverse positions that relate to a financial instrument for which the other side is not that same related party; (4) The Authority has the right to permit the company to offset reverse positions against risk components even if they are not related to financial instruments whose conditions are identical if it feels that the compatibility between them, taking into consideration the conditions of the financial instrument, justifies this; (5) The total calculated value of the currency market risk components will be the largest from among the following: a. The total calculated value of the currency market risk components in which the company holds a long position; b. The total calculated vale of the currency market risk components in which the company holds a short position; (c) Notwithstanding what is stated in subregulation (a), the allocation against the market risk of a liability according to a fixed-amount option will be 100 percent of the fixed amount. (d) If the market risk component is a right according to an option the company is permitted to substitute the total calculated allocations against it according to subregulation (a) with the option's market value. (e) If the market risk component is a liability according to an out-of-the-money option the company is permitted to reduce the total calculated allocations against it according to subregulation (a) by the difference in terms of the underlying asset between the exercise

38 price and the price of the underlying asset on the date of the calculation, and on the condition that the total amount is not less than 0. (f) In this regulation "Liability according to an option" a liability that arises from an option to sell or buy the underlying asset at the exercise price or to receive the difference between the exercise price and the value of the underlying asset and on the dates specified in the option; "Liability according to a fixed-amount option" a liability arising from an option to pay a predetermined fixed amount (hereafter: the fixed amount) according to the conditions of the option; "A right according to an option" the right arising from an option to buy or sell the underlying asset at the exercise price to receive the difference between the exercise price and the value of the underlying asset or to receive the predetermined fixed denominated amount, dependent on the value of the underlying asset and on the dates specified in the option; "Exercise price" the price at which the liability implicit in the option will be exercised; "Total interest rate differences" the difference between the interest rate expenses and the interest rate income during the year prior to the date for submitting the annual report; if the interest rate income is greater than the interest rate expenses, the value of the total interest rate differences will receive a value of 0; In this context, "interest rate income" and "interest rate expenses" are according to their meaning according to generally accepted accounting principles; "Calculated value of a risk component" the market value in terms of the underlying asset of a risk component. 86. Allocation against credit risk (a) The company is required to allocate an amount against exposure to credit risk which will constitute 8% of the total of the following: (1) Fifteen percent of the total calculated value of all credit risk components which are exposed to the credit risk of a counterparty that is a corporation belonging to the first risk group; (2) Twenty-five percent of the total calculated value of all credit risk components which are exposed to the credit risk of a counterparty that is a corporation belonging to the second risk group; (3) Seventy-five percent of the total calculated value of all credit risk components which are exposed to the credit risk of a counterparty that is a corporation belonging to the third risk group; (4) One hundred percent of the total calculated value of all credit risk components which are exposed to counterparties that clauses (1) to (3) do not apply to; (5) One hundred percent of the total calculated value of all credit risk components that clauses (1) to (4) do not apply to and on the condition that there is a single source of credit risk, where the total calculated value of all the credit risk components, for which it is the counterparty, exceeds twenty-five percent of the total calculated value of all the company's credit risk components. (b) In the calculation of the total calculated value of the credit risk components if the calculated value of the credit risk component is less than 0, the calculated value of the credit risk component will receive a value of 0;

39 (c) In order to calculate the credit risk components arising from trades included in a valid offset agreement, in which there is exposure against that same counterparty (1) In the calculation of the replacement values as stated in item (1) of the definition of "value of the credit risk component" the company has the right to offset replacement values of risk components smaller than 0 against the replacement values of risk components greater than 0 and on the condition that the total replacement value of the risk components, which was obtained as a result of the aforementioned offset, will not be less than 0; (2) In the calculation of the product of the financial risk coefficient and the value of the credit risk component in terms of the underlying asset as stated in item (2) of the definition of the "value of the exposure of a credit risk component", the company has the right to offset the values of the risk components in terms of the underlying assets of the reverse positions in identical financial instruments only; (3) In the calculation of the total calculated value of the credit risk components, the company has the right to deduct collateral, which was received from the other party, from the exposure values of the credit risk components, and on the condition that according to the valid offset agreement the company has the right to use the collateral to cover the liabilities owing to it due to the total credit risk components from which it was deducted and the total calculated value of the credit risk components which was obtained after the aforementioned deduction, will not be less than 0; (4) The Authority has the right to allow the company to offset reverse positions against risk components that clauses (1) to (3) do not apply to, if it feels that the level of compatibility between them, taking into consideration the conditions of the financial asset, justify this. (d) If a cash deposit in the currency of activity is deducted from the calculation of regulatory equity capital, because it is an encumbered asset, the company has the right not to calculate against it an allocation against credit risk according to this regulation; this subregulation will not apply to collateral that the company deposited with a liquidity supplier according to its meaning in the Second Schedule; (e) In this regulation "Valid offset agreement" an agreement between the company and the counterparty, in which all of the following are fulfilled: (1) The agreement specifies that in the case that the counterparty defaults, declares bankruptcy or in the case of liquidation proceedings or a cessation of proceedings the company will have the right to receive or the obligation to pay only the net amount after the offset of reverse positions of all the trades included in the agreement at their mark to market value; (2) The company has submitted a legal opinion to the Authority which confirms that according to the laws that are likely to apply to the trades in the cases described in clause (1) the liability of the company will be limited to the net amount after the offset of the reverse positions as described in clause (1); the opinion will be revised if there is a change in the relevant law; "Currency of operation" according to its meaning in generally accepted accounting principles; "Financial risk coefficient" the level of risk implicit in a credit risk component as described in the following table, for underlying assets and the period to maturity or exercise appearing in the following table; if more than one alternative appearing in the following table applies to a credit risk component, its financial risk component

40 will be the total of the aforementioned financial risk coefficients in each of the alternatives that apply to it. Period to maturity or exercise One year or less Interest-rate Currency Share risk Commoditydependent dependent risk components risk components (including gold) components risk components (not including gold) 0% 1% 6% 7% 10% 1-5 years 0.5% 5% 8% 7% 12% Over 5 years 1.5% 7.5% 10% 8% 15% Other risk components "Replacement value of a credit risk component" The current value of a credit risk component in the market and if there is no market value, then the cost of replacing the credit risk component with a different credit risk component that will reflect a cash flow with the same conditions; "Exposure value of a credit risk component" the sum of the following (1) The replacement value of the credit risk component; if the replacement value of the credit risk component is smaller than 0, then the replacement value of the credit risk component will receive a value of 0; (2) Product of the financial risk coefficient and the value of the credit risk component in terms of the underlying asset; "Calculated value of the credit risk component" the value of the exposure of the credit risk component less collateral received from the other party for whom the exposure exists due to that credit risk component. 87. Allocation against operational risk The amount that the company is required to allocate against exposure to operational risk will be 15% of the operating profit during the four quarters previous to the date of the most recent quarterly report, not including operating expenses. 88. Insurance (a) The company will insure itself such that the types and scope of coverage are appropriate to its operations. (b) At least once annually, the company will approve the types and scope of insurance coverage following a discussion by the Board of Directors and the receipt of a written opinion from an insurance advisor regarding the types and scope of insurance coverage.

41 (c) At least once annually, each of the following will approve the types and scope of insurance coverage: (1) The Board of Directors; (2) The CEO; (d) Insurance according to this regulation will be arranged with the holder of a license according to the Supervision of Financial Services Law (Insurance), or the holder of an exemption according to paragraph 86(a) of the aforementioned law. 89. Definitions for Chapter 13 In this chapter Chapter 13: Fees "Rating" one of four ratings of a company possessing a license to manage a trading platform, as described in the Fifth Schedule; "Revenue" as defined according to generally accepted accounting principles; "Index" the Consumer Price Index which is published by the Central Bureau of Statistics. 90. Annual fee (a) A company will pay an annual fee on August 1 st according to these regulations, for each financial year. (b) A company will pay a fixed annual fee as specified in the Fifth Schedule, according to its classification. (c) For a financial year in which the license was obtained or its license was cancelled, the company will pay the relative part of the annual fee that applies to it, which is equal to the amount of the annual fee divided by 365 days and multiplied by one of the following, according to the circumstances: number of days from the receipt of the license until the end of that financial year, the number of days since the beginning of that financial year until the date of the cancelation of the license or the number of days from the date the license was received until the date of the cancellation of the license. (d) If the date of the company's license occurs after June 30 th, it will pay the fee for that year on January 31 st of the following financial year; if the date of the cancelation of the company's license occurs, then it will pay the fee for that financial year within 30 days of the cancelation of the license. (e) If the annual fee was not paid on time, indexation will be added according to the rate of increase from the last index published prior to the date of payment until the latest index published before the date on which the fee was paid and also a fine at the rate of 1% of the annual fee for each month of arrears or part of a month. (f) Notwithstanding what is stated in subregulation (e), if the payment is in arrears for less than one month, a fine will be added to the amount of the unpaid annual fee equal to 1% of the fee, divided by 30 days and multiplied by the number of days the payment is in arrears. (g) If the payment of the annual fee exceeded the amount of the annual fee for that year, the Authority will return the excess amount, with the addition of indexation according to the 9 Book of Laws 5741, p. 208; 5761, p

42 rate of increase in the index from the last index published before the date of payment until the last index published before the date of the return of the excess amount, and with the addition of interest, according to its meaning in the Interest and Indexation Law, from the date of the payment until the date the excess was returned, within thirty days from the date on which it was realized that the payment was in excess. 91. Determination of rating (a) The company's annual rating will be determined each year according to the income in its financial reports for the previous year, although the annual rating of a company that is required to submit consolidated financial reports will be determined according to its income in the consolidated financial reports for the previous year; in the context of this regulation, "consolidated financial reports" according to its meaning in the Securities Regulations (Annual Financial Reports), (b) For a company that does not have financial reports for the previous year as of the date of the receipt of a license, its rating for the year in which it receives the license will be determined according to its income in the financial reports that were included in the application for a license. (c) If the date of the cancellation of a company s license is prior to the date for the submission of financial reports for the year prior to the date of the cancellation, its rating will be determined according to its revenues in the most recent financial reports it submitted. 92. Fee for a license application (a) A company that is applying for a license will pay a fee of 50,000 new shekels to the Authority. (b) A limited company that is applying for a license will pay a fee of 25,000 new shekels to the Authority. 93. Fee for changing the terms of a license A request to change a license such that an unlimited company becomes a limited company will require the payment of a fee of 25,000 new shekels. 94. Indexation (a) Revenues and fee amounts, as specified in this chapter and in the Fifth Schedule, will be revised on January 1 st of each year (hereafter: the date of revision) according to the rate of change in the index from the last published index relative to the base index; In this context, "base index" the last published index prior to the previous date of revision or before the day of commencement, according to its meaning in Regulation 96, according to the later of the two. (b) The revenues and fee amounts specified in this chapter and in the Fifth Schedule, which have been revised as mentioned, will be rounded off to the nearest five new shekels. 10 Book of Laws 5721 p. 192; 5761 p Collection of Regulations 2010, p.662, 2010 p. 756.

43 (c) The Chairman of the Authority or someone he has authorized for this purpose will publish the revised amounts according to what is stated in this regulation in Reshumot. 95. Application of the Tax Ordinance (collection) The Tax Ordinance (collection) will apply to the collection of fees, indexation differences and fines according to these regulations as if they were a tax according to its meaning in the aforementioned ordinance. 96. Commencement Chapter 14: Miscellaneous Instructions These regulations will go into effect six months from the day of their publication (hereafter: the day of commencement). 97. Transitional instruction (a) A company that has submitted a request for a license to manage a trading platform up until the day of commencement (hereafter in this regulation the applicant) has the right to continue to operate the trading platform as long as the Authority has not yet made a decision regarding the application. (b) The aforementioned in subregulation (a) will also apply to the application of an applicant for a different company that operates a trading platform on the day of commencement, which will in the near future transfer its operations in Israel (hereafter in this regulation: the transferring company) to the applicant, as long as the Authority has not yet made a decision regarding the applicant's application. (c) The application for a license to manage a trading platform will include details of both the applicant and the transferring company. (d) A company whose application for a license has been rejected will cease its activity within one month of receiving notice of the rejection of the aforementioned license application, apart from the withdrawal of funds by a client, the closing of a client's account and the closing of positions. (e) Starting from six months after the receipt of the license, the company will not carry out an activity for a client who was a client of the company prior to the day of commencement, unless it has fulfilled the instructions of Regulations 27 and 37, apart from withdrawal of funds by a client, closing of a client's account and closing of positions. 98. Temporary order (a) Without detracting from what is stated in Regulation 84 (1) By the end of 12 months from the date of commencement, the difference between the company's regulatory equity capital and what is stated in Regulation 85(b)(1) will not exceed 50% of the difference that existed between its regulatory equity capital and what is stated in Regulation 84(b)(1) on the date that the application for a license to operate a trading platform was submitted and on the condition that the company's regulatory equity capital is not less than the amount stated in Regulation 84(b)(2); (2) By the end of 18 months from the date of commencement, the difference between the company's regulatory equity capital and what is stated in Regulation 85(b)(1) will not exceed 25% of the difference that existed between its regulatory equity capital and

44 what is stated in Regulation 84(b)(1) on the date the application for a license to operate a trading platform was submitted and on the condition that the company's regulatory equity capital is not less than the amount stated in Regulation 84(b)(2); (3) By the end of 24 months from the date of commencement, there will not be any difference between the company's regulatory equity capital and what is stated in regulation 84(b)(1). (b) Chapter 13 will be valid for three years from the date of commencement. (Regulation 27) The Framework Agreement First Schedule The framework agreement will include the following chapters and items: 1. Chapter 1 Warnings (1) In Chapter 1, the following will be emphasized in bold: (a) The granting of a license by the Israel Securities Authority for the operation of a trading platform does not constitute confirmation of the quality of trading in the trading platform or that of the financial instruments traded in the trading platform or confirmation that this investment channel is safe or recommended; (b) The activity in the trading platform is not carried out in a stock exchange and therefore the client is exposed to risks, including the case of default of the trading platform or of the responsible company which is a counterparty to trades with the client (the name of the company will be stated, if it exists); (c) In trading activity, the company is subject to, among other things, conflicts of interest with respect to the client; it is selling when you are buying and it is buying when you are selling and therefore there may be situations in which the company profits when the client loses; (d) The company is prohibited from recommending to a client activity in a financial instrument in which it trades; (e) Leveraged activity involves a substantial risk of losing all of one's investment within a short period of time; (f) The trading in the trading platform involves the payment of commissions; (g) Within the framework of this document, it is not possible to explain all of the risks and all of the other variables that are necessary in order to determine whether trading in financial instruments through the trading platform is worthwhile; for further information on the risks involved in financial instruments traded in the trading platform, see Chapter 4; (2) If the Chairman of the Authority or an employee he has authorized for this purpose in writing is convinced that the company does not enable leveraged activity or is not active as a counterparty to the client's trades or does not determine the prices that it presents, he has the right to permit the company not to include the warnings stated in item (1), either some of them or all of them. 2. Chapter 2 General (1) The name of the company, its address and also the commercial name under which the company will provide its services if it is different from the company's name;

45 (2) A list of the channels of communication between the client and the company, including the channels for sending and receiving the client's instructions; (3) A list of the reports that the company will provide to the client, including reports according to these regulations, their content and the dates on which they will be received; (4) A referral to a location where the company's bylaws are accessible, including a detailed, comprehensive and clear description of the company's policy for dealing with conflicts of interest. 3. Chapter 3 The financial instruments A description will appear of the financial instruments that the company offers to a client, including a description of the risk implicit in them and a description of the following items for each financial instrument: (1) Information on the risk in investing in the financial instrument, an explanation of leveraging and the effect of leveraging on the investment's risk and also the risk of losing all of one's investment; (2) A description of the costs and additional liabilities that may arise for the client as a result of purchasing the financial instrument, beyond the cost of acquisition; (3) Information on the required collateral for implementing a trade in the financial instrument; (4) Information as stated in clauses (a) to (c) related to a group of financial instruments with similar characteristics or a group of underlying assets with similar characteristics, can be provided together for the aforementioned financial instruments or underlying assets; (5) If the financial instrument was offered to the public by means of a prospectus, then a referral will be provided to a location where the prospectus is accessible; (6) If the financial instrument involves an obligation to a third party, then the identifying details of the third party will be stated. 4. Chapter 4 Safekeeping of the clients' funds and assets (1) It will be stated that the funds of the client will be deposited with a bank or financial institution outside of Israel as described in Regulation 21, including a statement concerning the risks involved in this, which include the event of default; it will be explained which of the client's rights will not be deposited with the bank or financial institution outside of Israel, according to the circumstances, while explaining the risks implicit in this, including the significance of the fact in the event that the company defaults; (2) Identifying details of the bank or financial institution outside of Israel, according to the circumstances; (3) If the client's funds or assets have been deposited in a joint account, then this will be stated; (4) If the funds of the client have been deposited in a foreign currency, a description of the resulting exposure of the client to the foreign currency will be described; (5) If the client's deposited funds or assets will be subject to the laws of another country, then it will be explained that the rights of the client with respect to those funds or assets may be determined according to the laws of that country; (6) All of the activities that the company has the right to implement using the client's funds and assets will be described. 5. Chapter 5 Price and accompanying costs

46 (1) A description of the manner in which the total price of the financial instrument is calculated, with a description of the accompanying costs, and including commissions and expenses and taxes paid by the company; if it is not possible to state an exact price, the basis for calculating the aforementioned total price will be described; (2) If some or all of the components of the total price described in clause (a) are to be paid in foreign currency, the resulting cost will be described, including the exchange rates and the rates of conversion; (3) A list of the taxes applying to trades in the financial instruments which are not paid by the company or by means of the company; Second Schedule (Regulation 84 Calculation of regulatory equity capital) The regulatory equity capital consists of the total assets after deduction, less total liabilities after valuation, plus the adjusted amount of collateral, with the addition of receipts due to capital expansion carried out after the date of the latest financial reports, if it was carried out, with the following deductions: (1) Reductions due to off-balance-sheet liabilities; (2) Distribution, as defined in the Companies Law, that was carried out after the date of the latest financial reports; (3) If there occurred, after the date of the latest financial reports, events that would have led to a significant reduction of regulatory equity capital if the reports had been prepared at that time, including losses, reduction in the value of assets or an increase in the value of liabilities, then the full reduction; In this schedule Financial reports, expenses, liabilities, report on the financial situation and assets according to their meaning according to generally accepted accounting principles; Reduction due to off-balance-sheet liabilities an estimate of the liabilities, according to accepted models, on the date of the latest financial reports; Off-balance-sheet liability an agreement or arrangement which is likely to create a liability for the company in the future, according to generally accepted accounting principles, will not be recorded on the date of the latest financial reports as a liability in the report on the financial situation; Liability after valuation a liability, as recorded in the latest financial reports, with the addition of the amount of risk implicit in the liability in a financial instrument; in this context, amount of risk implicit in a liability in a financial instrument" the proportion of the liability as specified in the Seventh Schedule and for liabilities that are not listed in the Seventh Schedule one hundred percent of the liability; Date of the latest financial reports the date of the financial reports that were attached to the quarterly report according to its meaning in Regulation 74 or to the periodic report according to its meaning in Regulation 75 or another date on which the company prepared audited financial reports, according to the latest of the aforementioned;

47 Free asset an asset free of encumbrance, foreclosure, lien or any other right of a third party, excluding assets that belong to a consolidated company as defined in the Securities Law (Annual Financial Reports), ; 12 Asset after deduction an asset, as recorded in the latest financial reports, after deduction of the amount of risk implicit within it; Implicit amount of risk (1) With regard to a free asset the proportion of the asset which appears in the Seventh Schedule; (2) With regard to an asset that is not free or an asset for which a proportion is not specified in the Seventh Schedule one hundred percent of the asset. Adjusted amount of collateral the proportions listed below from within the total collateral deposited by the company with liquidity suppliers, which was reduced since they are non-free assets: (1) Collateral deposited by the company with a liquidity supplier that is a corporation, which belongs to the first risk group one hundred percent; (2) Collateral deposited by the company with a liquidity supplier that is a corporation, which belongs to the second risk group ninety-five percent; (3) Collateral deposited by the company with a liquidity supplier that is a rated corporation, which belongs to the third risk group fifty percent; (4) Collateral deposited by the company with a liquidity supplier that is not a rated corporation, which belongs to the third risk group twenty percent; (5) Collateral deposited by the company with a liquidity supplier which does not belong to the first, second or third risk group fifty percent; Third Schedule (Regulation 86 Allocation due to exposure to credit risk) 1. First risk group: A bank in Israel, a bank outside of Israel, a financial intermediary, a country or its central bank which meet the following conditions, according to the circumstances: (1) If it is a bank outside of Israel it possesses a license in the country in which it operates and is under the supervision of a body that has the power by law to supervise banking activity in a country that is a member of the OECD and if it had done business in Israel would have needed a banking license according to the Banking Law; (2) If it is a financial intermediary it possesses a license in the country in which it operates, is subject to the supervision of a body that has the power by law to supervise its activity in a country that is a member of the OECD, including supervision with regard to risk-based equity capital requirements that are comparable to those determined in these regulations and on the condition that this involves a credit risk component whose maturity is less than three months; 12 Collection of Regulations 5770, p. 662, 5770 p. 756.

48 (3) If it is a bank in Israel, a bank outside of Israel or a financial intermediary its securities or those of a corporation that controls it are registered for trade on the Stock Exchange in Israel or on a stock exchange outside of Israel; (4) At least one of the Israeli rating agencies or at least two of the international rating agencies have given it a rating that appears in item (1) in the table of ratings (in this Schedule the table). 2. Second risk group: A bank in Israel, a bank outside of Israel, a financial intermediary, a country or its central bank, that fulfill the conditions stated in clauses (1) to (3) of item 1, and at least one of the Israeli rating agencies or at least two of the international rating agencies have given it a rating that appears in item (2) in the table; 3. Third risk group: A bank in Israel, a bank outside of Israel, a financial intermediary, a country or its central bank that meet the conditions appearing in clauses (1) and (2) of item 1; and it is not rated or at least one of the Israeli rating companies or at least two of the international rating agencies have given it a rating that appears in item (3) of the table or less than that. Table Rating Agency Maalot Midrug Moody's Fitch S&P (1) Rating for AA- Aa3 A1 A+ A+ the first risk group (2) Rating for A+ A1 A3 A- A- the second risk group (3) Rating for BBB+ Baa1 Baa3 BBB- BBBthe third risk group Fourth Schedule (Regulation 73 Report for calculating the allocations against risk and regulatory equity capital) The report for calculating the allocations against risk and regulatory equity capital will include the following chapters and items: (1) Allocation due to market risk (a) The total calculated value of all share market-risk components and the total calculated value for each group of identical share market-risk components; the data will be presented before and after the offset of reverse positions; (b) The total calculated value of all interest rate-dependent market risk components and also the total calculated value of each group of identical interest-rate-dependent market risk components; the data will be presented before and after the offset of reverse positions; (c) The total calculated value of currency market-risk components that are held by the company in long positions and the total calculated value of currency market-risk components held by the company in short positions; and also the total calculated

49 value of the aforementioned components with respect to each group of identical currency market-risk components; the data will be presented before and after the offset of reverse positions; (d) The total calculated value of all commodities-dependent market risk components and also the total calculated value with regard to each group of identical commoditiesdependent market risk components; the data will be presented before and after the offset of reverse positions; (e) The total calculated value of all general market risk components included in the calculation according to regulation 85(a)(5) (in this item general market risk components) and also the total calculated value with regard to each group of identical general market risk components; the data will be presented before and after the offset of reverse positions; (f) The total of all interest rate differences; (g) In every place where an offset of a market risk component in subregulations (a) to (e) has been carried out, the presentation of the data will distinguish between an offset carried out according to regulation 85(b)(3) and an offset carried out according to regulation 85(b)(4); (h) There will be a description of the reductions due to a liability according to out-of-themoney options; if the company has carried out such a reduction, then the underlying asset, the difference between the exercise price and the price of the underlying asset in terms of the underlying asset and the total reduction that was calculated for it will be presented; (i) For fixed-amount options, a description of the underlying asset and the fixed amount according to the terms of the option will be presented instead of what is specified in items (a) to (e); (j) A company which has substituted allocations due to a right according to an option with the market value of the option according to regulation 85(d) will present the market value of the option for a right according to the aforementioned option in place of what is stated in subregulation (a); (k) Total allocations against market risk according to Regulation 85 which will be presented in aggregate and separately for each group of risk components listed in subregulations (a) to (f) and (i) to (j); (l) In every place in which data is presented not in the reporting currency, alongside the data will appear the exchange rates used by the company to calculate the allocations; In this item "total interest rate differences" and the "calculated value of a risk component" as defined in regulation 85(f); "offset" according to its meaning in regulation 85(b)(3) and (4). (2) Allocation due to credit risk (1) The following details will be presented for each source of material credit risk: (a) Name of the source of credit risk and on the condition that is it is not a client; (b) The rating of the source of credit risk, if there is one, and the rating agency; (c) The risk group to which the credit risk source belongs, according to the Third Schedule; (d) Whether there is a valid offset agreement; (e) Total replacement value of the credit risk components before and after offset; (f) The total of each product of the financial risk coefficient and the value of the credit risk component in terms of the underlying asset before and after offset;

50 (g) Total calculated value of the credit risk components; (h) In every place where an offset was carried out for the product of the financial risk coefficient and the value of the credit risk component in terms of the underlying asset, the credit risk components that were offset will be described; (2) The following details will be presented for each risk group: (a) Total calculated value of all credit risk components; (b) The proportion of the total calculated value of the credit risk components that are exposed to the risk group within the total calculated value of the company's credit risk components; (c) Total of each allocation against credit risk; (3) The product of the concentration coefficient and the total calculated value of all the credit risk components will be presented and the allocation required against concentration; (4) The total computed value of the company's credit risk components will be stated; (5) The total of each allocation against credit risk according to Regulation 86; (6) In this item "Value of the exposure of a credit risk component", "replacement value of a credit risk component", "calculated value of a credit risk component" as defined in Regulation 86(e); "offset" according to its meaning in Regulation 86(c); (3) "Allocation due to operational risk" The following details will be presented: (a) The operating profit during the four quarters preceding the date of the latest quarterly report, not including operating expenses according to its meaning in Regulation 87; (b) The total allocation against operational risk according to Regulation 87. (4) The total allocation required against market risk, credit risk and operational risk. (5) "Regulatory equity capital" The following details will be presented, according to their meaning in the Second Schedule: (1) A list of the company's assets and alongside them a list of their values after deduction; (2) A list of the company's liabilities and alongside them a list of their values after valuation; (3) A list of the off-balance-sheet liabilities on the date of the latest financial report and alongside them a list of their reductions; (4) Receipts due to a capital increase that was carried out after the date of the latest financial reports; (5) A distribution, according to its definition in the Companies Law, which was carried out after the date of the latest financial reports; (6) A list of significant reductions in regulatory equity capital due to events that occurred after the date of the latest financial reports; (7) A list of the amounts of collateral deposited by the company with each one of the liquidity suppliers and alongside them the rate of risk implicit in them, according to their meaning in the Second Schedule; (8) Total regulatory equity capital. (Regulations 89 and 90 annual fee) Fifth Schedule

51 Revenues (in new shekels) Ranking Amount of annual fee Up to 2,000,000 A' 50,000 Between 2,000,001 and 10,000,000 B' 90,000 Between 10,000,000 and 25,000,000 C' 270,000 Above 25,000,001 D' 360,000 (Regulation 4) Sixth Schedule (1) Austrian ATX Prime Index (Austria); (2) S&P/ASX 200 (Australia); (3) FTSE MiB Index (Italy); (4) S&P 500 Index (USA); (5) NASDAQ-100 (USA); (6) Dow Jones Industrial Average (USA); (7) Euronext Bel-20 (Belgium); (8) FTSE 100 Index (Britain); (9) DAX (Germany); (10) OMX Copenhagen 20 Index (Denmark); (11) AEX-Index (Holland); (12) Nikkei 225 (Japan); (13) IBEX 35 Index (Spain); (14) CAC 40 Index (France); (15) S&P/TSX Composite Index (Canada); (16) OmX Stockholm 30 Index (Sweden); (17) Swiss Market Index (SMI) (Switzerland). Seventh Schedule The financial instrument Bond that are not structured bonds. 1(a) Bonds issued by the State of Israel or the US government or the government of a country whose long-term credit rating according to S&P or Fitch is AAA or its credit rating according to Moody's is Aaa, and which are traded in Israel or outside of Israel; 1(b) Corporate bonds that are not convertible, which are traded in Israel or outside of Israel, and which Maalot has rated as AA- or higher or Midrug has rated as Aa3 or higher; The rate of risk implicit in the financial instrument 3% with an addition of 1% multiplied by the number of years to maturity of the bond; in this context, the number of years to maturity of the bonds will be rounded upward to the nearest whole number. 25%

52 1(c) Corporate bonds that are not convertible, which are traded in Israel or outside of Israel, and which Maalot has rated as A+ to BBBinclusive or Midrug has rated as A1 to Baa3 inclusive; 1(d) Corporate bonds that are not convertible, which were issued by companies whose shares are included in the Tel Aviv 100 index or the Tel Aviv Midcap Index, and which Maalot rated as BB+ or lower or Midrug has rated as Ba1 or lower, or are not rated at all; 1(e) Bonds traded in Israel or outside of Israel that are convertible into shares that are included in the Tel Aviv 25 Index; 1(f) Bonds that are traded in Israel or outside of Israel, which are convertible into shares included in the Tel Aviv 75 Index; 1(g) Bonds that are traded in Israel or outside of Israel, which are convertible into Tel Aviv MidCap shares; 1(h) Bonds that are traded outside of Israel which are not convertible, which S&P has rated as AA- or higher or Moody's has rated as Aa3 or higher or Best has rated as aa- or higher; 1(i) Bonds that are traded outside of Israel that are not convertible, which S&P or Fitch has rated as BBB- to A+ inclusive or Moody's has rated as Baa3 to A1 inclusive or Best has rated as bbb- to a+ inclusive; 40% 75% 25% 40% 75% 30% 45% Tradable securities 2(a) Tradable securities which Maalot has rated as A-2 or higher or Midrug has rated as P-2 or higher; 2(b) Tradable securities which Maalot has rated as lower than A-2 or have not been rated at all or which Midrug has rated as lower than P-2 or have not been rated at all; 10% 20% Shares 3(a) Shares included in the Tel Aviv 25 Index 25% 3(b) Shares included in the Tel Aviv 75 Index 40% 3(c) Shares included In the Tel Aviv MidCap 75% Index

53 3(d) Other shares that are traded on a recognized stock exchange outside of Israel, which are included in recognized indexes of the stock exchanges outside of Israel, whose price is, at least, 1 dollar (US) or a price denominated in a different currency which is equivalent to a value of at least 1 dollar (US), and excluding aforementioned shares whose trading has been suspended; 3(e) Shares traded outside of Israel, which are included in the S&P 500 Index, whose price is at least 1 dollar (US) or whose price is denominated in a different currency and is equivalent to a value of at least 1 dollar (US), and excluding aforementioned shares whose trading has been suspended; 3(f) Shares traded outside of Israel which are included in the Russell 1000 Index and whose price is at least 1 dollar (US) or their price is denominated in a different currency and is equivalent in value to at least 1 dollar (US) and excluding aforementioned shares whose trading has been suspended; 30% 45% 80% Derivative assets traded on the Stock Exchange in Israel 4) Call1 (call options whose exercise price is 1 new shekel only) 35% ETNs (Exchange Traded Notes) 5(a) ETNs that are convertible into shares included in the Tel Aviv 25 Index or that provide the holder with the right to exchange them for the price of the Tel Aviv 25 Index, which Maalot has rated as AA- or higher or Midrug has rated as Aa3 or higher; 5(b) ETNs that are convertible into shares included in the Tel Aviv 100 Index or that provide the holder with the right to exchange them for the price of the Tel Aviv 100 Index, which Maalot has rated as AA- or higher or Midrug has rated as Aa3 or higher; 5(c) ETNs that are convertible into shares included in the Tel Aviv 75 Index or that provide the holder with the right to exchange them for the price of the Tel Aviv 75 Index, which Maalot has rated as AA- or higher or Midrug has rated as Aa3 or higher; 30% 40% 45%

54 5(d) ETNs that are convertible into shares included in the Tel Aviv MidCap Index or that provide the holder with the right to exchange them for the price of the Tel Aviv MidCap Index, which Maalot has rated as AA- or higher or Midrug has rated as Aa3 or higher; 5(e) ETNs that are convertible into shares included in recognized indexes of stock exchanges outside of Israel or which provide the holder with the right to exchange them for the price of the aforementioned indexes, and which S&P or Fitch or Maalot have rated as AA- or higher or Moody's or Midrug have rated as Aa3 or higher or Best has rated as aaor higher; 5(f) ETNs on shares traded outside of Israel, which are included in the S&P 500 and which S&P or Fitch or Maalot have rated as AA- or higher or Moody's or Midrug has rated as Aa3 or higher or Best has rated as aa- or higher; 5(g) ETNs on shares traded outside of Israel, which are included in the Russell 1000 Index and which S&P or Fitch or Maalot have rated as AA- or higher or Moody's or Midrug has rated as Aa3 or higher or Best has rated as aaor higher; 5(h) ETNs that are convertible into bonds issued by the State of Israel or the US government or the government of a country whose long-term credit rating according to S&P and according to Fitch is AAA or whose credit rating according to Moody's is Aaa and S&P or Fitch or Maalot have rated the aforementioned ETNs as AA- or higher or Moody's or Midrug have rated them as Aa3 or higher or Best has rated them as aa- or higher; 5(i) ETNs that are convertible into corporate bonds which are not convertible, and which are traded in Israel, whose rating is as specified in item 1(b) of this Schedule or which can be exchanged for the price of the index in which they are included and which have been rated by Maalot as AA- or higher or which have been rated by Midrug as Aa3 or higher; 80% 35% 50% 85% 8% with an additional 1% multiplied by the number of years to maturity, rounded upward to the nearest whole number; in this context, "number of years to maturity' the period to maturity of a bond that is included in a bond ETN, which is farthest away from maturity among the bonds included in the bond ETN; if the period to maturity of the bonds included in the bond ETN has not been defined in the terms of the ETN, the rate of risk implicit in the ETN will be 25%. 30%

55 5(j) ETNs that are convertible into corporate bonds which are not convertible, and which are traded in Israel, whose rating is as specified in item 1(c) of this Schedule or which can be exchanged for the price of the index in which they are included and which have been rated by Maalot as AA- or higher or which have been rated by Midrug as Aa3 or higher; 5(k) ETNs that are convertible into corporate bonds which are not convertible, and which are issued by companies whose shares are included in the Tel Aviv 100 Index or the Tel Aviv MidCap Index, and whose rating is as specified in item 1(d) of this Schedule, and which have been rated by Maalot as AA- or higher or which have been rated by Midrug as Aa3 or higher; 5(l) ETNs that are convertible into US dollars, euros, Canadian dollars, Swiss francs, pound sterling or Japanese yen or which give the holder the right to exchange them for the price of the aforementioned currency, and which Maalot has rated as AAor higher or which Midrug has rated as Aa3 or higher; 5(m) ETNs that are convertible into a different currency or which give the holder the right to exchange them for the price of the aforementioned currency, and which Maalot has rated as AA- or higher or Midrug has rated as Aa3 or higher; 45% 80% 20% 50% ETFs (Exchange Traded Funds) 6(a) An ETF on bonds that are not convertible, are traded outside of Israel and which S&P and Fitch have rated as AA- or higher or Moody's has rated as Aa3 or higher or which Best has rated as aa- or higher; 6(b) An ETF on bonds that are not convertible, which are traded outside of Israel and which S&P or Fitch has rated as BBB to A+ or Moody's has rated as Baa3 or higher or Best has rated as bbb to a+; 6(c) An ETF on shares traded outside of Israel which are included in recognized indexes of stock exchanges outside of Israel; 6(d) An ETF on shares traded outside of Israel which are included in the S&P 500 Index; 6(e) An ETF on shares traded outside of Israel which are included in the Russell 1000 Index; 30% 45% 30% 45% 80%

56 Mutual Funds 7(a) Units of mutual funds which according 4% to their investment policy have all of their assets invested in deposits, makam and shekel-denominated unindexed bonds issued by the State of Israel, which mature in up to two years and their assets are not invested in shares or derivatives; 7(b) Money market funds 10% 7(c) Units of mutual funds which according 15% to their investment policy have their assets invested in deposits, makam and the bonds mentioned in item 1(a) of this Schedule and their assets are not invested in shares or derivatives; 7(d) Units of mutual funds which according 20% to their investment policy have their all of their assets invested in shares that are included in the Tel Aviv 25 Index, in bank deposits and in the bonds mentioned in item 1(a) of this Schedule and whose level of exposure to shares according to the Joint Trust Investments Regulations (classification of funds for publication purposes), (hereafter: the Joint Investments Classification Regulations) is equal to 1; 7(e) Units of mutual funds which according 25% to their investment policy, have all of their assets invested in shares that are included within the Tel Aviv 25 Index, in bank deposits and in the bonds mentioned in item 1(a) of this Schedule and their level of exposure to shares according to the Joint Investments Classification Regulations is 2 or 3; 7(f) Units of mutual funds which according 35% to their investment policy, have all of their assets invested in shares that are included within the Tel Aviv 25 Index, in bank deposits and in the bonds mentioned in item 1(a) of this Schedule and their level of exposure to shares according to the Joint Investments Classification Regulations is 4; 13 Collection of Regulations 5768 no. 6625, p. 152.

57 7(g) Units of mutual funds which according to their investment policy, have all of their assets invested in shares that are included within the Tel Aviv 100 Index, in bank deposits and in the bonds mentioned in item 1(a) of this Schedule and their level of exposure to shares according to the Joint Investments Classification Regulations is 1; 7(h) Units of mutual funds which according to their investment policy, have all of their assets invested in shares that are included within the Tel Aviv 100 Index, in bank deposits and in the bonds mentioned in item 1(a) of this Schedule and their level of exposure to shares according to the Joint Investments Classification Regulations is 2 or 3; 7(i) Units of mutual funds which according to their investment policy, have all of their assets invested in shares that are included within the Tel Aviv 100 Index, in bank deposits and in the bonds mentioned in item 1(a) of this Schedule and their level of exposure to shares according to the Joint Investments Classification Regulations is 4; 7(j) Units of mutual funds whose level of exposure to shares is 0 according to the Joint Investments Classification Regulations and which do not have a disclosure obligation as a mutual fund with regard to possible exposure to bonds that are not rated as required by the instructions of the Israel Securities Authority, which were published according to paragraph 97(b) of the Funds Law; 7(k) Units of mutual funds whose level of exposure to shares is equal to 1 according to the Joint Investments Classification Regulations and which do not have a disclosure obligation as a mutual fund with regard to possible exposure to bonds that are not rated as required by the instructions of the Israel Securities Authority, which were published according to paragraph 97(b) of the Funds Law; 35% 40% 50% 40% 50%

58 7(l) Units of mutual funds whose level of exposure to shares is equal to 2 or 3 according to the Joint Investments Classification Regulations and which do not have a disclosure obligation as a mutual fund with regard to possible exposure to bonds that are not rated as required by the instructions of the Israel Securities Authority, which were published according to paragraph 97(b) of the Funds Law; 7(m) Units of mutual funds whose level of exposure to shares is equal to 4 according to the Joint Investments Classification Regulations and which do not have a disclosure obligation as a mutual fund with regard to possible exposure to bonds that are not rated as required by the instructions of the Israel Securities Authority, which were published according to paragraph 97(b) of the Funds Law; 8(a) Short-term bank deposits in new shekels, tradable certificates of deposit and credit balances in demand deposits in new shekels; 8(b) Short-term bank deposits in a foreign currency the US dollar, euro, Canadian dollar, Swiss franc, pound sterling or Japanese yen; 8(c) Short-term bank deposits in a different foreign currency; 75% 85% 0% 10% 40% The of, 5774 (The of, 2014) Yair Lapid Minister of Finance