Tel Aviv, Watch Out: Haifa Wants Its Own Stock Exchange

Mayor wants tech-heavy bourse similar to U.S. Nasdaq.

Bloomberg

Haifa, Israel’s third-largest city, is launching a plan to set up the country’s second stock exchange in the hopes of creating a second financial center after Tel Aviv, the city’s mayor told Reuters.

Haifa Mayor Yona Yahav said he had written to Finance Minister Yair Lapid requesting permission to open a technology-based stock market, which would rival the Tel Aviv Stock Exchange)

“It would be something which is close to the Nasdaq,” he said, referring to the tech-heavy U.S. exchange run by Nasdaq OMX Group.

The municipality is also seeking financial partners to help establish the bourse. “We believe this will lift growth in the northern region of Israel,” said Yahav, who acknowledged that the city of some 275,000 residents had attempted a similar venture in the 1990s.

Haifa is Israel’s largest port and home to research centers run by the likes of Intel, IBM, Google, Apple, Yahoo, Microsoft and Philips.

But some analysts were skeptical of the idea, particularly as the TASE is going through a tough time.

“The first one (the TASE) is sick at the moment, so to add a second one doesn’t make sense,” said veteran market analyst Richard Gussow. “First, cure the main stock exchange in Tel Aviv and then start thinking about a second exchange.”

The number of companies listed on the TASE has shrunk 27% to 475 from 654 since 2007, while average daily trading volume has fallen sharply in the past two years. Many Israeli firms, particularly the high-tech ones Haifa hopes to lure, prefer to head straight to New York and bypass Tel Aviv.

Disagreements on how to revive the TASE cost the jobs of both the bourse’s chief executive and chairman last year. Its new CEO, Yossi Beinart, has said he aims to add another 100 companies to the bourse in the next five years and to cater more to small and medium-sized companies.

Yahav denied that setting up a new exchange would harm the TASE. “I have never heard before that competition is damaging,” he said. “Israel is being built on one economic center - the state of Tel Aviv. This is unprecedented in the world.”

But Yahav’s plan flies in the face of an established consolidation trend among major Western bourses, designed to save money in trading technology and attract crucial levels of liquidity without which any bourse cannot survive.

The Finance Ministry said it had not yet received any formal request from Haifa, while the Israel Securities Authority said it was not familiar with the initiative. The TASE declined to comment.