INTERVIEW-Tel Aviv stock exchange chief defies maternal revolt

Tue Jun 11, 2013 3:48pm BST

Quotes

   

* Exchange to open 1 hour later to give overlap with Wall St

* Also looking at new instruments to attract investors

* These include weekly options on blue chip TA-25 index

* TA-25 futures denominated in $ could be traded on Eurex

By Michael Stott and Alexander Smith

LONDON, June 11 (Reuters) - In her mission to boost activity on the Tel Aviv Stock Exchange (TASE), CEO Ester Levanon faced opposition from an unlikely quarter: women incensed by her plan to add an hour to the trading day.

"Mothers approached my grandchildren saying: 'tell your grandmother not to do it'," the exchange's chief executive said on Tuesday of extended trading, which from June 16 will bring Tel Aviv into line with European exchanges and create a one-hour overlap with Wall Street.

"Right now we stop trading the minute the U.S. starts," Levanon said, adding this has prevented arbitrage in stocks listed in both Tel Aviv and on the NYSE or Nasdaq exchanges.

Levanon, who started at TASE in 1986 after setting up and managing the computer division of the Israeli security service, sees such changes as essential in developing the country's stock exchange and ensuring it can provide an attractive platform for Israeli companies seeking to raise funds.

The extension to the trading day - to 5.25 pm (1425 GMT) from 4.25 pm on Monday to Thursday - is going ahead despite lobbying to postpone its introduction.

And Levanon has other initiatives in mind.

She is also looking to introduce new products and is considering tie-ups with other exchanges, aiming to keep TASE relevant to domestic and international investors who can tap in to Israel's forecast GDP growth of 3.8 percent in 2013.

TASE has been around since September 1953, when trading in securities, which had been going on since the 1930s, was formalised following the 1948 formation of the State of Israel.

It is now home to some 521 companies, including Teva Pharmaceutical Industries Ltd, whose market capitalisation of around $37 billion makes it Israel's most valuable company.

But like other exchanges around the world, TASE has seen its volumes fall in the years following the financial crisis.

And it was urged this month by a government panel to find ways of attracting more high-tech companies, to prevent foreign firms from swooping on unlisted start-ups and making off with the country's talent.

RAISON D'ETRE

Levanon believes the raison d'etre of exchanges is to serve their local country's economies and companies - a dig at publicly quoted bourses which are answerable first and foremost to their own shareholders.

"Tel Aviv Stock Exchange should take care first and foremost for Israeli companies," Levanon, her hair cropped fashionably short and wearing a brooch in the shape of a flying white bird, said over breakfast before speaking at an annual investor conference promoting Israel in London.

"Exchanges lost their way ... they forgot there is a reason for exchanges. They have to cater for the country they are based in," she said, arguing it would be a good thing for European exchange Euronext to be spun out of NYSE Euronext once the latter's takeover by IntercontinentalExchange Inc is complete.

She saw no room for complacency, even though trade in Israeli government bonds, with a daily turnover of nearly $1 billion, is booming and corporate bond volumes of nearly $300 million a day are also doing well.

Daily equity market volumes nearly halved in 2012 from their peak in 2008, before recovering to $295 million in 2013.

"We are trying to look for things to revive the exchange, new instruments to attract new investors," Levanon said, adding this included the launch next month of "weeklies", options on the blue chip TA-25 index which expire every week rather than every month as the existing option product does.

"Once we have derivatives (linked to the index) it will also enhance activity in the stocks," Levanon said.

Another idea being explored by Levanon is one proposed by Eurex, the derivatives exchange owned by Deutsche Boerse AG , that TA-25 futures denominated in dollars could be traded on Eurex.

The trick is to do this without cannibalising TASE's own market.

"We believe we have found a way of doing it ... we will present (it) to our board next month," Levanon said.

But she does not underplay the scale of the task confronting TASE and other exchanges in the West.

"When you are in a huge hole," she said, "it doesn't really matter who pushed you in." (Editing by David Holmes)