Gov’t to approve turning TASE into for-profit venture

TASE
TASE

Minister of Finance Kahlon will present a plan to reinvigorate the ailing Tel Aviv Stock Exchange by changing its aim and its ownership structure.

The reform of the Tel Aviv Stock Exchange has picked up pace. On Sunday, Minister of Finance Moshe Kahlon will ask the government to approve a bill to change the structure of the exchange - turning it into a for-profit enterprise.

This does not constitute a privatization of the exchange: it is already privately-held. Instead, the proposal fundamentally changes how the TASE will operate - as an ordinary for-profit firm in place of the existing non-profit model, in which the brokers (the exchange members) hold power.

According to the framework document on the allocation of TASE shares as part of the reorganization - approved by the exchange members and promoted by TASE chairman Amnon Neubach - the banks will receive 70% of the remodeled exchange. They were initially slated to receive an 80% stake based on Neubach’s original framework, but the figure was lowered to appease non-bank exchange members.

The model by which the shares will be allocated to companies takes into account several criteria: the company’s contribution to exchange revenue, its contribution to trading volume, and its seniority.

In the next phase, any banking group with more than 5% of the exchange will be forced to sell shares to drop below that threshold; the change will lower the representation of the banks on the board from 70% to 35%. Both the Ministry of Finance and the Israel Securities Authority hope an international organization will join the exchange after its transformation and that the TASE will become a member of the international exchange network - which would significantly improve the position of the exchange and its contribution to the Israeli economy.

Kahlon said the proposal would provide an incentive to the exchange to operate competitively, seek out new members, and cut costs to investors, to become a competitor to the banking system that can serve as an alternative source of credit and link up with foreign exchanges. Furthermore, the reform will end the long-running control of the exchange by the banks.

Kahlon added: “The proposal will promote growth for the economy; it will strengthen the exchange and help it regain its status as the growth engine of the Israeli market. It will open the door for companies both domestically and abroad. The exchange will offer a variety of savings sources at varying levels of risk. And the move will lead us towards a more competitive exchange that will reduce the high transaction fees paid by the public.”

After being approved by the government, the bill will pass to a first reading in the Knesset.

Published by Globes [online], Israel business news - www.globes-online.com - on June 30, 2016

© Copyright of Globes Publisher Itonut (1983) Ltd. 2016

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