Israel Securities Authority chairman Prof. Shmuel Hauser today held a discussion at the Globes Capital Market conference with BDO Ziv Haft managing partner Erez Soffer under the title, "Regulation and Globalization: Trade, Regulation, and Supervision."
"Globes": Over the past year, you took forceful action against the binary options industry and the enormous damage that those active in it are causing us around the world. Explain why.
Hauser: "Are you familiar with the term 'blood diamonds'? Binary options are blood diamonds - money taken by fraud and robbery. It has to be understood that binary options are essentially a gambling instrument, and we have received hundreds of complaints from people in Israel and overseas who lost their money, and are claiming that they were deceived.
Asked whether he had not given up on the Tel Aviv Stock Exchange (TASE), Hauser answered, "Despite the current negative sentiment towards the TASE and incorrect statements that it is moribund, I'm still optimistic. Our reforms and initiatives are achieving results. For the first time since the crisis, there is a change in the trend in the first half of 2017. The number of companies has grown, the offerings market is heating up, and trading volume has grown by over 20%."
You recently spoke about tax concessions for TASE investors. Is that the way?
"The TASE is far from realizing its place in the Israeli economy. In order for the TASE to fulfill its function as a source of capital in competition with the banks and others, and in order to encourage competition and lower prices, the TASE should be regarded as a national priority region, and tax benefits should be granted to TASE investors and companies. These tax benefits are justified affirmative action, because they are transparent and supervised, and are in the public eye, in contrast to investments by investment institutions, which manage the general public's money, and private companies, which are not transparent, and about which information is limited.
"As a rule, I think that transparency is not given the respect it deserves. Transparency is the best purifier. Tax benefits are justified, also due to the fact that they can divert money from the real estate market to the capital market, thereby contributing to the capital market and cooling off the real estate market. Affirmative action through tax benefits can also have another advantage, because the government's tax proceeds will increase if the tax rates are lowered."
Is cooperation with a foreign stock exchange in the cards?
"We know that there are several important stock exchanges interested in cooperation with the TASE. I believe that cooperation with a foreign stock exchange is essential to the development of every stock exchange in a digital world, and is definitely critical for the TASE. I hope and expect that additional members will join the TASE and enlarge its base of investors, increase trading, and add competition, reducing trading fees in the process."
"We haven't finished our work here"
I have read that you recently signed a mutual recognition agreement with the UK and Germany. Can you explain this to us? In the same context, why is this important, given the fact that dual-listed companies, such as Mellanox Technologies Ltd. (Nasdaq:MLNX), are seeking to be delisted from the TASE? Why do you expect them to come?
"First of all, the dual listing amendment to the Securities Law was designed from the beginning to have Israeli companies that raised capital in the US listed on the TASE. TASE registration of foreign companies is also possible, of course. This is hugely important, because these companies account for 12% of all the companies on the TASE, but contribute almost 50% of all the trading on the TASE. They make a significant contribution to trading.
"Secondly, several important facts should be kept in mind: there are now 90 Israeli companies that have raised capital in the US, mostly on Nasdaq. In 2014, following the announcement that Mellanox had been delisted from TASE trading, there were 47 dual-listed companies. Several of them have since been delisted, but many other new companies listed their shares for trading on the TASE, including Opko Health Inc. (NYSE: OPK; TASE: OPK), Mylan N.V. (Nasdaq: MYL; TASE: MYL), Sodastream International Ltd. (Nasdaq: SODA; TASE: SODA), Ormat Technologies Inc. (NYSE: ORA; TASE: ORMT), Kenon Holdings Ltd (TASE:KEN: NYSE: KEN-WI), and others.
"There are currently 62 dual-listed companies. I emphasize: from the perspective of Nasdaq-listed Israel companies, the dual listing amendment to the Securities Law grants an almost total exemption from the burden imposed by the Israel Securities Law, and dual listing has an important economic benefit resulting from the added liquidity in trading of their shares, accompanied by better pricing. Today, on the average, over 40% of the total trading in dual-listed companies' shares comes from Israel.
"We haven't yet finished our work here, however. We're now working on the possibility of recognizing stock exchanges in Singapore, Hong Kong, and Toronto in the dual listing amendment, which will enable Israel and foreign companies listed for trading on these stock exchanges to be listed for trading on the TASE and be free of the burden imposed by the Israel Securities Law. In addition, two weeks ago, we signed a mutual recognition agreement with the UK and Germany, in addition to France. The agreement means that the regulators of the countries with the most developed capital markets in Europe recognize the quality of Israel regulation and our Israeli prospectus. The next stage is recognition of our financial statements. Taking into account the fact that we are fully adopting the provisions of the IFRS standard, I believe that this stage will also be completed. This will enable TASE-listed Israeli companies to be listed on stock exchanges in Europe almost automatically."
Published by Globes [online], Israel Business News - www.globes-online.com - on June 13, 2017
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