Israel Moves to Make Tel Aviv Stock Exchange For-profit

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The Tel Aviv Stock Exchange.
The Tel Aviv Stock Exchange.Credit: Moti Milrod

REUTERS — Finance Minister Moshe Kahlon will submit a bill to change the structure of the Tel Aviv Stock Exchange to a for-profit entity to cabinet ministers on Sunday, he said on Wednesday.

TASE's members approved a demutualization plan last year for Israel's stock market, which is struggling with falling trading volumes and a declining number of listed companies.

Markets regulator Shmuel Hauser said on Monday that the plan would be completed this year.

"This is a process that will bring economic growth, strengthen the stock exchange and allow it to return to its rightful place as a central engine of growth of the Israeli economy," Kahlon said.

The move would also make Israel's stock exchange more competitive and lead to lower fees for investors, he said.

Israel is home to a flourishing start-up sector and the stock exchange management has said that becoming a for-profit company would help encourage start-ups to list in Tel Aviv, rather than listing on New York's Nasdaq or relying on private funding as many have done.

Once the cabinet approves the plan, it needs parliamentary approval.

Under the plan, announced in 2014, member brokerages and Israeli and foreign banks including Citicorp, UBS and HSBC would become shareholders.

"It will change the structure of the stock exchange to a more modern one like in Western countries, where there is a separation between ownership and the companies on the exchange," Hauser, head of the Israel Securities Authority, said on Wednesday.

It would also reduce conflicts of interest and Israeli banks' dominance on the market, he said.

Hauser has said TASE could see a sharp increase in trading volumes after demutualization and that the exchange should be able to cooperate with U.S. and European stock markets.

Trading volumes this year have averaged 1.28 billion shekels ($332 million) a day, down from 1.45 billion in 2015 and well below 2 billion a day in 2010.

The number of companies listed on the stock market has dropped by 200 over the past decade to 455 due to low liquidity on the exchange as well as mergers.

Hauser this week also recommended the government offer tax breaks to stock exchange investors to boost sluggish trading volumes.

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