The Tel Aviv Stock Exchange (TASE) wants to expand the "quasi-banking" services that stock exchange members owned by investment houses will be able to provide to their customers, while also paving the way for expansion of the number of stock exchange members to include insurance and credit card companies.
A draft paper for public comment released this week entitled "Changes in Permitted Fields of Activity for Non-Bank Stock Exchange Members - Providing Credit to Customers" states that the TASE board of directors will discuss changes to the exchange's memorandum and articles such that stock exchange members belonging to investment houses will not be limited to providing credit solely for the purposes of trading in securities through them, and, in addition, will also be able to offer payment services.
At the moment this means permitting investment houses to issue means of payment, chiefly credit cards, to their customers in the future. As far as the TASE is concerned, this is a matter of laying the infrastructure for a change in the market that is still in the initial stage. Incidentally, if investment houses are able to issue credit cards, they will also be able to set up customer clubs of their own to rival those of the credit card companies.
The move requires approval from the Israel Securities Authority (ISA). It is being undertaken, the TASE says, following a joint study of the local brokerage market by the ISA and the Competition Authority, which found that there was a problem in competition in the brokerage market for private individuals, since it is heavily dominated by the banks.
This is despite the fact that the cost of running a securities account at the banks is much higher than the alternative offered by the investment houses (through their stock exchange members). The ISA and the Competition Authority recommended, among other things, that stock exchange members should be allowed to issue means of payment directly from the customers' trading account, making it easier for them to manage their financial affairs.
This represents a substantial change for the existing situation in which a stock exchange member that is not a bank "may deal in securities on behalf of others or on its own behalf", and may not grant a regular loan to its customers. If the move is approved, it will not mean any change to TASE rules concerning collateral in the form of liens on securities or bank guarantees for stock exchange members' customers who take credit. Nor will there be any change to the amount of credit that can be given to a customer and the capital requirements relating to credit risk.
At the same time, the TASE has issued a draft document on allowing insurance companies and credit card companies, which are closely regulated by the Insurance, Savings and Capital Markets Authority and the Bank of Israel Banking Supervision Department respectively, to become TASE members. The aim is to "create greater competition for customers among investors in Israel and to make the stock exchange more accessible to the general public."
Published by Globes, Israel business news - en.globes.co.il - on January 20, 2021
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