The Israel Securities Authority is weighing a series of steps aimed at solving the liquidity crisis at the Tel Aviv Stock Exchange, including a plan to turn the TASE into a for-profit company and list its shares for trading.
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ISA Chairman Shmuel Hauser has appointed an expert panel, chaired by Moshe Ben-Horin, to study the problem and make recommendations. The panel is scheduled to complete an interim report within about a month that will also include proposals for how institutional investors operate.
The TASE has seen daily trading volumes sink over the last two years, partly because of a drop in foreign investment, while many listed companies have quit the exchange - most notably the semiconductor company Mellanox. Daily trading volume has averaged just NIS 1.09 billion so far this year, down from NIS 2.04 billion for all of 2010, the record year.
Some experts assert that part of the TASE's problem is that, as a nonprofit body - as it is organized now - it has become a closed club for banks and several large brokerage houses that control it. That has discouraged competition, which would lower trading commissions or any incentive to increase turnover.
Converting the TASE into a for-profit business would be in line with the global trend of the last decade.
The commissions charged on securities trading have remained virtually unchanged over the last decade, even as the bourse itself has lowered the charges it imposes on the brokerage houses. The fact that the savings haven't been passed on is evidence of the lack of competition in the market. The Ben-Horin panel is considering ending minimum commissions, introducing commissions for heavy trading and introducing new financial products.
Among the other changes being considered is changing the criteria for membership in the TASE to encourage new members, sources said. That could be done by easing the criteria for membership or creating different kinds of membership with differing standards. That could open the way for foreign financial institutions to become members.
A for-profit TASE would have an incentive not only to increase the number of members, but also recruit more companies to list their shares for trading. Sources point to the Nasdaq Stock Market in the United States, which has employees whose sole job is to monitor Israeli companies that are potential candidates for initial public offerings and campaign for them to list their shares.
Institutional investors would be encouraged to do more equities trading by ending the ceiling on any single investor holding more than a 5% stake in any one publicly traded company.