The Tel Aviv Stock Exchange finished its first week of closing daily trading at 5:30 P.M. between Mondays and Thursdays, following the decision by its board last month to extend trading four days a week by one hour. The move was meant to stem a decline in trading turnover and allow activity to overlap with trading on Wall Street.
Personnel working in the local capital market had hoped the lengthened trading sessions would be compensated for by moving up the close of trading on Sundays to 2:30 P.M. But the Israel Securities Authority refused to allow this, so in the meantime trading still ends at 4:30 P.M. on the first day of the week.
The addition of four weekly work hours isn’t a trivial matter for people working in the capital market. Traders expressed their opinion on the matter quite succinctly when we visited the trading room of Meitav Trade on the 14th floor of Tel Aviv Museum Tower earlier this week. Sharing the room are 12 traders, eight responsible for trading on the TASE and four who execute buy and sell orders on Wall Street.
TASE traders grew up on the saying: “The pen falls at 4:30 P.M.” and once trading closes for the day, everyone closes up shop and heads home. At the same time the traders dealing with Wall Street take over the workstations from the Tel Aviv traders, but the stock exchange’s decision has obviously affected the routine. The traders dealing with both Tel Aviv and New York now need to all cram themselves into one room at the same time, something they hadn’t been accustomed to doing.
Average daily turnover on the TASE until this week was NIS 900 million as opposed to slightly over NIS 1 billion in 2012 and NIS 1.7 billion in 2011. Declining trading volumes are a worldwide phenomenon and not limited to Israel.
Over the four days this week, turnover averaged NIS 1.17 billion, ending Thursday with NIS 1.34 billion changing hands in bullish trading.
Meitav Trade CEO Asher Tubul thinks the extended trading hours will ultimately have a negligible effect on turnover. “The activity of day traders will grow, and new arbitrage players will join in,” he says. “This will boost volumes, but not dramatically. The extending of the trading hours has a much broader effect: It harms the traders and back-office personnel who will need to put in more hours. The overlap in trading hours will increase turnover for options on the TA-25 index since they will be a need to adjust positions following the changes to indices.”
Yoni Baram, trading supervisor at Meitav Trade, thinks the stock exchange took the easy way out. “It’s like looking for the coin under the lamppost,” he says. “Turnover would grow if it were possible to open short positions properly in the TASE just like overseas. But this is more complicated so why should they do that?
“We forget that Tel Aviv is a small and concentrated market with geopolitical risk,” continues Baram. “The solution adopted will be good for the short-term and the results will be meager. Sunday trading, in my opinion, should be canceled entirely. Liquidity on Sunday is very low and there’s no foreign currency trading. Prices of dual-listed stocks are determined in the foreign stock markets and adding an hour to trading doesn’t provide any real value.”
Will the change in hours hold up? Opinions at Meitav Trade are mixed. Supporters of extended trading believe there could be room for a more substantial change that would include canceling Sunday trading and instituting trading on Fridays. Some think trading should kick off at a later hour, at 10:30 A.M., and end at 6:30 P.M. to overlap more with trading in Europe.
Many of Israel’s capital market operators believe that increasing burdensome regulation on market players and traded companies is the largest cause of the shrinking trading volumes. Regulations include guidelines and restrictions on financial institutions that turn buying securities by them into a drawn-out, complicated, and expensive process. Regulation has also brought about a nearly complete halt on initial public offerings by new companies on the exchange and even to the delisting of many companies from trading.
In October 2005 Shmuel Hauser, currently chairman of the Israel Securities Authority, who at the time headed a committee looking into the issue, recommended extending trading until 5:30 P.M. Trading hours were changed accordingly but in 2008, the year of the global crash, turnover again shrunk.
A labor dispute that erupted between stock market employees and management led to work sanctions, and management finally decided at that point that the extended trading day hadn’t proved worthwhile. TASE CEO Ester Levanon, who supported shortening the trading day, has since changed her mind.