OTC Markets hopes number of Israeli listings can double this year

US financial trading platform OTC Markets hopes to attract up to 18 Israeli companies this year, double the number last year, as they seek a cheaper alternative to listing on traditional exchanges such as Nasdaq.

New York-based OTC Markets operates three markets – QX for larger companies, QB for venture companies and Pink, its open market. Companies such as Lufthansa, Roche and Air Canada use the OTC for their US listings.

Last year, nine Israeli firms listed on OTC’s top two markets, up from five in 2015. OTC Markets executive vice president Jason Paltrowitz said that number “could double” this year as smaller companies increasingly realize there are other financing options besides staying private or going public on a national market such as Nasdaq.

“National exchanges in the US under-serve smallcap companies,” Paltrowitz told Reuters on Wednesday during a visit to Israel to promote OTC to Israeli businesses. “Companies in the early stage are not ready.”

The average cost of listing on OTC is about $250,000, compared with about $2.5 million to list on Nasdaq, he said. “If you have a $20 million market cap, that’s a lot of money to spend.”

Paltrowitz sees the OTC as a stepping stone to listing on bigger markets as well as a complement to the Tel Aviv Stock Exchange. About 500 companies have graduated from OTC to Nasdaq, including Israeli 3-D printer maker Nano Dimension, he said.

Currently, some 70 Israeli firms trade on the trio of markets, 22 of them on QX and QB, while some of Israel’s largest firms – telecoms group Bezeq, Bank Hapoalim and conglomerate Delek Group – trade on the pink exchange.

Paltrowitz said he is in talks with Hapoalim, Israel’s largest bank, to “upgrade” to QX, which would provide a larger investor pool and only cost $20,000. He is also hoping to get other Israeli firms to move to QX, which requires a minimum market value of $10m.

Unlike Nasdaq and the New York Stock Exchange, OTC would be a company’s secondary market. It accepts foreign-disclosure and reporting requirements such as those of the TASE, keeping companies’ costs low.

At the end of 2016, there were 9,620 US and global securities traded on OTC Markets, and 51 international firms were listed on OTC markets in the first quarter of this year.