Israel Securities Authority Seeks Advice on Increasing Trading Volumes on TASE

Regulator consulting with McKinsey & Company to determine how to increase liquidity on Tel Aviv Stock Exchange

The consulting group McKinsey & Company has been retained by the Israel Securities Authority to look into why trading volumes on the Tel Aviv Stock Exchange have dropped and recommend way to address the problem.

Dissatisfied with the recommendations formulated by a committee formed to study the issue, ISA Chairman Shmuel Hauser hired the U.S. firm about a month ago. An ISA spokesman, however, said the work of McKinsey and the committee were, in fact, complementary.

“The committee acted quickly after it was formed and during the course of its work toward formulating interim recommendations a decision was made to hire a consulting company,” the ISA said in a statement. “The consulting company’s work will aid the committee in formulating its final conclusions.”

Formed in April, the committee chaired by Moshe Ben-Horin, who teaches at finance the Ono Academic College, submitted its recommendations in September, which included ending Sunday trading and moving it to Friday to align the TASE trading week with the world’s other stock exchanges. The panel suggested introducing after-hours trading for some of the larger stocks traded on the exchange and to turn the TASE into a for-profit business, like many other stock exchanges in developed countries. This would also mean listing shares of the TASE for trading, so that it would no longer be answerable to the bank and investment houses that use it but to investor shareholders.

Hauser, who already announced at a TA-100 Summit conference in July that all possible solutions for the exchange would be examined and that there would be “no sacred cows,” is thought to be in favor of this option.

Daily trading volume on the TASE for shares and convertible bonds has averaged just over NIS 1.1 billion so far this year, down from NIS 2.04 billion for all of 2010, a record year. Tensions between the ISA and the bourse's management over the problem led the both the TASE’s CEO and chairman stepping down this year.

Yossi Beinart, who was president of Chicago’s North American Derivatives Exchange, or Nadex, has been named the new CEO and will take over the post at the start of next year.

David Bachar