Israel Cabinet to Vote on Tel Aviv Bourse Reform on Sunday

  • Members including Citi, HSBC may need to sell part of holdings
  • Proposal could end banks’ control of country’s stock exchange

Israel is advancing its plan to turn the country’s stock market into a for-profit entity that aims to be more competitive and serve as a more attractive platform for companies seeking to raise capital.

Finance Minister Moshe Kahlon will present draft legislation for Cabinet approval on Sunday before it is submitted for endorsement by the Knesset to replace Israel’s existing stock exchange law. Among the proposed changes, the number of exchange members will be increased, ending its “historic control by the banks,” the Israel Securities Authority said in a joint statement with the Finance Ministry late on Wednesday.

Israel’s only exchange has been battling a dearth of equity offerings and sliding trading volumes ever since it was upgraded to developed market status by MSCI Inc. in 2010, forcing it to compete with larger peers for investor attention. The bourse has been struggling to limit the influence of its largest members and increase the number of listings on the index to boost liquidity.

“The bill will help increase trading volumes and investments as well as ease regulation which will make it more attractive for companies to list on the Tel Aviv exchange,” Shmuel Hauser, chairman of the Israel Securities Authority, said in the statement.

Proposed Limit

Under the draft bill, bourse members including units of Barclays Plc., Citigroup Inc. and HSBC Holdings Plc., will need to sell part of their holdings to meet the proposed limit of five percent ownership. The legislation would reduce the banks’ holdings to 35 percent from 71 percent. The bill also proposes shifting to a Monday to Friday trading week from the current Sunday to Thursday schedule to align trading times with global stock exchanges -- a move opposed by the banks. Most Israeli businesses close on Fridays, the eve of the Jewish Sabbath.

Since the beginning of the year $700,000 was raised in the share market compared with $1.4 billion for the whole of 2015. The average daily trading volume in the main index this year has slumped 30 percent from 2013, according to data compiled by Bloomberg.

The Cabinet will also discuss a separate plan for Israel to adopt a cross-listing model allowing transactions of foreign shares traded on the main exchanges in the U.S. According to the proposal, the Tel Aviv bourse would list as many as 50 companies each valued at more than $50 million.

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