Share prices around the globe have been quite strong of late, but not in Tel Aviv. While the volume of trade on foreign exchanges has been growing, on the Tel Aviv Stock Exchange, the figures have been shrinking.
This sad state of affairs has only recently become fully apparent, as the crisis in the corporate bond market revealed the TASE's frailty - nearly half are trading in junk territory.
What is really depressing is that even this shrunken trading volume comes mostly from several hundred professional traders at a handful of trading houses and another few hundred day-traders who couldn't survive without their daily stock market fix.
Is the entire Israeli capital market based on these several hundred individuals?
Major investors left the TASE after tiring of constant political attacks from populist members of the Knesset. Foreign investors, lacking any fidelity to the Zionist enterprise, followed suit. Most worryingly, the Israel public left the TASE on finding it a hollowed-out stock market beyond repair.
Who's left trading on the Tel Aviv Stock Exchange? The only people still trading on the exchange are those who can't run away. That is, fund investors like us. Israeli investment funds hold portfolios that are worth billions of shekels on paper. But given the current lack of buyers and low share-trading volumes, stocks are worth less than the prices listed on the TASE ticker. At this point, the TASE is a fool's paradise and a stock exchange for suckers.
I don't know about you, but I feel like a chump.
When he recently retired after 17 years on the job, Israel Securities Authority economist Shmuel Hauser said 90 percent of the cases of stock-fixing the authority had investigated on his watch involved shares with low trading volumes.
“It is relatively easy to manipulate these kinds of stocks,” he said at the time.
In 2005, Hauser gave more than 80 percent of the companies on the TASE the dubious honor of being illiquid - low trading volumes in their shares, and deemed them unsuitable to be traded on the exchange.
The current bond crisis has proven Hauser correct.
So why do they continue to play us for fools? Why don't they just tell us the truth? The harsh reality is that a stock exchange that doesn't have sufficient trading volume has no reason to exist. Thousands of Israeli stock traders have reached this depressing conclusion over the past few years and moved their investment to Wall Street.
I take some responsibility myself. Here are some of the reasons I trade stocks on Wall Street and not on the TASE.
I'm not willing to pay the TASE's trading fees, which are several times higher than those on Wall Street.
I'm not willing to pay the high fees that the TASE management demands every two months for real-time trading figures.
I'm not willing to give myself over to the handful of trading houses that control most of the TASE's trading volume and can push the market to and fro at will. And I'm not willing to buy shares that I know will not always be easy to unload later because of the lack of market liquidity. I could continue.
Is there a solution? Sure. Privatize the TASE, break up the trading houses' monopoly and cut trading commissions and user fees on trading data. The TASE could also add some investment vehicles that are common around the world – like stock options and short-selling – and the government could cancel the tax hike on capital gains.
Is this possible? Unfortunately, with the current government preoccupied with its short-term survival rather than long-term planning and reforms, this solution is just a dream. But at least dreams are still tax-free.
The writer is the chairman of TradeNet Capital Markets, a day-trading school for people who want to manage their own investments.
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