Israel Bourse CEO Lays Out Plan to Boost Struggling Exchangeby
CEO aims to grow retail trading, financial offerings on bourse
Trading volumes have fallen 40 percent over past six years
The new chief executive officer of Israel’s stock exchange plans to broaden its offerings of financial products and ease the regulatory burden on companies and investors, as it aims to reverse the trend of sagging trading volume and share listings.
Itai Ben-Zeev, who became Tel Aviv Stock Exchange CEO in January, unveiled his strategy at a press conference Tuesday. The plan calls for reduced regulation to encourage local institutional investment in Israeli stocks, introduces the securitization of loans such as mortgages, and seeks to boost retail trading.
Trading volumes and initial public offerings have plummeted since MSCI Inc. upgraded Israel to developed-market status in 2010, which put Israel in competition with the U.S., Japan and major European countries for the attention of the world’s biggest investors. Daily turnover has declined 40 percent since the MSCI upgrade, to $330 million in 2016, according to bourse data.
“The numbers speak for themselves,” said Ben-Zeev, who previously headed the capital markets division at Bank Leumi Le-Israel Ltd., the country’s second-biggest lender. "The volume isn’t deep enough with too many of our shares. No one is going to enter an investment if he doesn’t know how he’ll be able to get out of it."
Sluggish trading on the TASE has forced local money managers, who are flooded with billions of shekels each month since a 2008 law that aimed to boost public saving, to invest much of their portfolios abroad, Ben-Zeev said.
Compounding matters, many companies have delisted from the TASE to avoid heavy-handed regulation. Most of Israel’s young technology companies opt to raise money through venture capital funds or on foreign stock exchanges abroad, partly for the same reason. The bourse is working with regulators in the finance ministry, central bank and securities authority to pass the plan he’s proposing, Ben-Zeev said.
"There’s a significant change in the mood of the regulators and their willingness to make the Tel Aviv Stock Exchange play a significant and leading role in the capital markets and the Israeli economy," he said.
Bringing to Tel Aviv the 90 Israeli companies whose shares are traded only abroad would help drive volume, Ben-Zeev said. Those shares are worth about 264 billion shekels ($72.4 billion), or 32 percent of the total market capitalization of locally traded companies. The TASE also will try to convince some 2,000 small or medium-sized Israeli businesses, tech startups and real estate and infrastructure companies to raise money on the bourse, he said.
The strategic plan didn’t address the root cause of the exchange’s woes: Israel’s status on the MSCI index. Yossi Beinart, who resigned as bourse CEO last year, considered changing Israel’s trading week to Monday-Friday, and lobbied the MSCI to include Israel in its European index.
Some other parts of the plan proposed by Ben-Zeev:
- Wobi, whose platform allows Israelis to compare insurance policies, is developing a platform for retail investors and will become a member of the bourse
- Reduce shareholder voting requirements for Israeli investment houses
- Israeli banks will become equity market-makers in order to handle large trades, subject to Bank of Israel approval
- A central lending bureau will be established to ease trades such as short-selling
- A digital alternative will be created for listing share services, currently offered only by three Israeli banks