The Knesset Finance Committee today approved a structural change in the Tel Aviv Stock Exchange (TASE). According to the bill, ownership of the TASE will henceforth be separated from its members, i.e. the owners will be separated from the providers of trading services. This structural change is designed to increase competition and lower TASE trading fees.
Following the reform, the TASE will become a profit-making corporation that will be able to distribute dividends to its shareholders, and more companies will be able to trade on it and provide trading services. Up until now, only TASE shareholders, mainly the banks, could trade on it and provide these services.
The banks will now be forced to reduce their share in the TASE to 5% by selling most of their holdings in the TASE within five years of the date on which the law is passed. The estimated NIS 500 million in profits from the sale in excess of the capital accumulated in the TASE will pass to the state. Senior capital market sources expect the designated change to give the public control of the TASE, which will be managed like any other public company. The second and third votes in the Knesset plenum for final passage of the bill will be held in the coming days.
The reform is projected to drastically change TASE ownership in the coming years from a total of 22 owners to many more companies. The proportions of ownership of the TASE will change accordingly. While 71% of the shares are currently held by the banks, their combined holdings are slated to fall to 35%, with a maximum of 5% for each bank (to be precise, 4.99%). After the bill becomes law, the state's supervisory and enforcement authority over the TASE will increase, and supervision will become tighter, because the state has the status of a regulator over the TASE through the Israel Securities Authority, even though it does not own shares in it. The Securities Authority chairman will be able to veto the appointment of senior TASE officeholders, and to unseat the current officeholders.
Concerning trading days on the TASE, the issue of Friday trading was raised during the discussion of the bill. It was eventually decided that the matter would be addressed and settled through the TASE Rules and Regulations as part of regulations to be brought before the Finance Committee for approval, rather than through the initial legislation. It was also agreed that the banks and companies providing trading services would be obligated to report the fees they charge to the customers, including in comparison with the other companies operating on the TASE.
Knesset Finance Committee chairman MK Moshe Gafni (United Torah Judasim) repeated his demand during the committee meeting, saying, "The surtax on profits from stock exchange investments should be reduced. This is needed as a supplementary measure in order to save the TASE."
Answering Gafni, Ministry of Finance director general Shai Babad said, "Reducing the surtax is difficult. As a matter of policy, we are unable to separate the surtax on profits from capital investments from the surtax on income from labor."
Published by Globes [online], Israel Business News - www.globes-online.com - on February 20, 2017
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