JERUSALEM, Sept 7 (Reuters) - Israel’s stock market won the right to become a for-profit bourse on Thursday, culminating a three-year push to alter its structure to make it more competitive, cheaper and more efficient.
The Tel Aviv Stock Exchange’s (TASE) demutualisation plan, approved by the city’s district court on Thursday, aims to end banks’ control and boost listings and trading volumes.
Most stock exchanges in Western countries have adopted for-profit structures in recent decades.
TASE, which will now be entitled to distribute its earnings and even issue shares in public offerings, has struggled for years to revive flagging listings and volumes, despite attempts to reform.
Under the new structure, member brokerages and Israeli and foreign banks including Citigroup, UBS and HSBC will become shareholders of TASE.
Israel’s banks will be limited to holding no more than 35 percent of shares in the demutualised bourse, down from 71 percent, to bring it into line with other exchanges. Banks must sell their TASE shares within five years so each holds no more than 5 percent.
The bourse said that the reform is “necessary to enhance competition in the capital market and attract new members from Israel and abroad” and is “expected to benefit investors by rendering TASE more prominent and accessible to the public.”
It estimated the enlistment of new members would likely lead to the lowering of commissions that members charge their clients.
The demutualisation plan, which was launched in 2014, was approved by Israel’s parliament in March this year and will now go into effect immediately.
“Today the Tel Aviv Stock Exchange embarks on a new era, joining the world’s leading exchanges,” said TASE Chairman Amnon Neubach. “The demutualisation facilitates the entry of new TASE players and will contribute to the establishment of partnerships, which will lead in turn, to increasing competition and will strengthen TASE’s position in the Israeli capital market.”
The Israeli public currently holds, directly and through institutional investors, some 500 billion shekels ($142 bln) in equities and 900 billion shekels of government and corporate bonds.
TASE has seen around 200 de-listings over the past decade and trading volumes have slumped. This year they have averaged 1.5 billion shekels ($425 million) a day, up from 2015 and 2016 but well below 2 billion a day in 2010.
The new legislation also expands the government’s regulatory oversight, with the chairman of the Israel Securities Authority given the power to veto senior appointments to the bourse and fire senior management.
TASE brought in a new chief executive at the start of this year, Itai Ben-Zeev. It also revamped its indexes, adding 10 more companies to its blue-chip index. ($1 = 3.5303 shekels) (Reporting by Steven Scheer; Editing by Susan Fenton)