TASE reform inches closer with Finance Committee’s nod

Israel took a major step toward removing the Tel Aviv Stock Exchange from the control of the country’s banks on Monday when the Knesset Finance Committee approved a reform plan.

A final vote by the Knesset on the proposal to make the banks sell their TASE shares within five years so that each holds no more than 5% is expected in the coming days.

Israel’s banks will be limited to holding no more of 35% of shares in the demutualized bourse, down from 71%, in an effort to bring it into line with other exchanges.

“This is an important reform that should boost the volume of trade in the capital market and strengthen Israel’s economy,” Finance Committee chairman Moshe Gafni said.

The TASE has struggled for years to revive flagging listings and volumes, despite attempts to reform.

The proposed new ownership structure, combined with changes to the oversight of the exchange, will lead to more competition, a cut in trading fees and greater liquidity for the business sector, Finance Minister Moshe Kahlon said.

“The stock market has been crippled by the bank’s burden on competition and on trading fees for their own benefit,” he said.

Along with more than 200 delistings over the past decade, TASE daily volumes have slumped and averaged NIS 1.27 billion ($343 million) in 2016, down from NIS 1.45b. in 2015 and NIS 2b. in 2010.

Under the plan, announced in 2014, member brokerages and Israeli and foreign banks including Citigroup, UBS and HSBC would become shareholders. Most stock exchanges in Western countries have adopted for-profit structures in recent decades.

The new legislation also expands the government’s regulatory oversight, with the chairman of the Israel Securities Authority (ISA) granted the power to veto senior appointments to the bourse and fire senior management.

ISA chairman Shmuel Hauser said the bill will bring TASE up to speed with the most advanced bourses in the world.

Despite opposition from Kahlon, Gafni said he intends to introduce additional legislation to reduce taxes on the stock exchange’s earnings in an effort to attract more investors.

The TASE began 2017 with a new chief executive, Itai Ben-Zeev. Earlier this month, the TASE revamped its indexes, adding 10 more companies to its blue-chip index.