Tel Aviv exchange eyes longer day to attract foreign investors

TEL AVIV Sun Dec 23, 2012 2:34pm GMT

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TEL AVIV (Reuters) - The Tel Aviv Stock Exchange (TASE) is looking to extend trading by an hour in the coming months in a bid to attract more European investors and boost trading volumes, Chief Executive Ester Levanon told a news conference on Sunday.

Israel's trading day starts at 9:30 a.m. (0730 GMT) and ends at 4:30 p.m. - two hours before European sessions finish.

"We believe we should be part of Europe and that means trading as close as possible to European hours," Levanon said.

She proposes initially extending the day by one hour and then assess whether it makes sense to add a second hour.

The TASE in 2009 shortened its trading day by an hour to end at 4:30 p.m. after it became evident that the extra hour, which also coincided with an hour overlap with U.S. markets, did not increase turnover much.

Now, with nearly three-quarters of share trading algorithmic, Levanon said traders will easily be able to adapt to the longer hours.

Also, some 40 percent of the weight of the blue-chip Tel Aviv 25 .TA25 is made up of shares that are dual-listed in Tel Aviv and on the Nasdaq or New York Stock Exchange, underscoring the need to have some overlap with the United States.

The proposal will be brought to the TASE's board next month and Levanon hopes extended trading day will begin in March.

After a slow start to the year, the blue-chip TA 25 is up 12.4 percent this year after an 18.2 percent drop in 2011.

TASE announced that trading volumes in 2012 had fallen 38 percent to 1.065 billion shekels (175.57 million pounds) versus a 25 percent decline in the United States and a 20-30 percent fall on European exchanges.

Bond volumes, though, were up 9 percent this year to 4.095 billion shekels.

In the absence of any initial public offerings in 2012, capital raising in equities was down 39 percent to 3.1 billion shekels, while non-government bond raising slipped 7 percent to 37.9 billion shekels.

Levanon said 2012 wasn't a bad year but it was challenging and that forced the bourse's management to make changes and seek out relationships with foreign exchanges.

She noted that foreign investors account for just 15-20 percent of trading on the TASE.

The exchange, Levanon said, is weighing an offer to trade TA 25 index futures on Eurex, the largest derivatives exchange in Europe in which its hours extend until the end of U.S. trading.

"There are a lot of advantages to having European and American investors have access to TA 25 futures," she said, adding that some details needed to be worked out but trading could start sometime in 2013.

TASE is also waiting to hear from the FTSE and MSCI about whether they will add the Tel Aviv exchange to their European indexes.

Both had upgraded the TASE to developed market status from an emerging market in 2010 but that ended up harming Israel since passive money left but it wasn't replaced by active cash.

Levanon said the bourse approached MSCI about Israel joining the European index, which would give European investors more access to trading in Israeli banks, retailers and other companies.

MSCI earlier this year said it would study the request and that it would question investors.

Levanon estimated between $1 billion and $2 billion would flow into Israel's market should it be included in the European index.

MSCI has kept quiet about the process, which gives Levanon encouragement. "I haven't heard that they gave up, so that's a good sign," she said.

(Editing by Jason Neely)

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