Ittai Ben Zeev, CEO, Tel Aviv Stock Exchange (TASE) shares his 2018 viewpoints with us.
Looking ahead to 2018, what are the most important regional and global trends shaping your exchange or CCP?
In 2017, the Tel Aviv Stock Exchange became a demutualised enterprise. Under demutualisation, TASE’s ownership is now separate from TASE membership. One of the rationales behind Tel Aviv’s demutualisation is the facilitation of cross-border partnerships and initiatives. Now more than ever, we are open for business, open to suggestions and well poised to pursue innovative partnering opportunities. Having greater strategic flexibility, TASE is now better positioned to follow, and maybe even get ahead of global and regional trends as they unfold.
In the wake of the demutualisation, we are now redrafting membership requirements to facilitate foreign and remote membership. We are experiencing growing interest from foreign companies seeking access to Israel’s capital markets by issuing or listing securities on TASE. In 2017 IPOs and public debt offerings surged, in part fuelled by companies based or operating outside of Israel.
As far as current global trends are concerned, we are keeping an eye on the market for digital currencies, which is taking the world by storm. This trend, which poses both challenges and opportunities for securities exchanges around the globe, affects Israel as well. Israeli regulators are currently drafting their position regarding this asset class, and at TASE we are waiting to see what kind of impact this will have on trading as well as on clearing and settlement. As with any new area of activity or asset class, we must examine the phenomenon and determine how to best deal with it, not only locally, but at the global level as well.
Digital currencies, unlike other asset classes, have an added dimension, which may prove to have more profound implications for financial exchanges and CCPs than a bullish bitcoin. The underlying blockchain technology, with its advantages in transaction authentication and security, is a potential game-changer for financial markets, facilitating the creation of whole new classes of exchange-traded and CCP-mediated products, and possibly paving the way for new solutions to settlement risk, both on and off the trading floor.
Are there any significant regulatory changes on the horizon that may impact the way you do business?
As I mentioned earlier, we are currently in the midst of demutualisation, which received final approval only a few months ago. Our focus in undertaking demutualisation was strategic from the get go, and we are currently examining several alternatives to further our strategic plan.
We are considering partnering with overseas securities exchanges to facilitate greater foreign investor activity in TASE. As mentioned above, TASE seeks to promote high-tech companies and enrich Israel’s already dynamic start-up eco-system by broadening investor exposure and accessibility to these companies. We believe that this can best be achieved by partnering with one or more foreign securities exchanges.
What are your key strategic priorities for the coming year?
By opening our doors to new members, domestic and international, we seek to improve liquidity and competition within the market and deepen interaction with the international financial community. It is expected to benefit investors by rendering TASE more prominent and accessible to the public. We estimate that the enlistment of new members will lead to the lowering of commissions members charge their clients.
One of the rationales behind Tel Aviv’s demutualisation is the facilitation of cross-border partnerships and initiatives.
Armed with the knowledge that a major factor in enhancing liquidity is to increase the trading volumes of sophisticated Israeli and international investors, we are pushing ahead with a number of significant measures to upgrade our technological infrastructure to international standards. Such measures include shortening the physical distances to the trading systems at TASE; making co-location services available as is customary elsewhere in the world; and encouraging the activity of Israeli and international players using high-speed trading strategies.
At the beginning of 2018 we established a nominee company, wholly owned by TASE to expand our services to listed companies. TASE will provide public companies with a variety of services that will include: listing for trade, registering with the nominee company and depositing with the clearing house. In addition, for the first time in Israel, digital registration services that will not require the issuance of a physical certificate will be available. This should reduce the risks in the registration process and cut public companies’ operating expenses.
Also, we are expecting that 2018 will see continued growth in the number of new companies on TASE, as well as a higher market value of IPOs and more companies becoming dual listed. We will continue taking measures to maintain our position as a major contributor to corporate growth in Israel and to be an effective platform for Israeli and international investors.
How do you feel the social role of financial market infrastructures is changing?
The traditional economic role of stock markets, providing liquidity to facilitate long-term capital formation and growth, embodies a vital social element which should not be forgotten. Public markets are by nature democratic, designed to serve the broadest base of investors and most diverse aggregation of companies. At the end of the day - and despite recent challenges - securities exchanges provide the best mix of liquidity, integrity, transparency and investor protection, when compared with other financial institutions, investment schemes and trading platforms.
That said, and perhaps in light of the many challenges exchanges have had to face in recent years, there is a need, in my opinion, for exchanges to re-evaluate their interaction with the public and the companies they serve. We must take a more proactive approach if we are to remain competitive and viable in today’s dynamic financial environment. This means abandoning the traditional model in which securities exchanges are largely indistinct, passive trading platforms. It goes beyond merely creating new products or recruiting more IPOs. As a measure to encourage public participation and to enhance transparency, TASE has this year published a centralised offerings board. The second stage, which will be launched in 2018, is expected to make participation in an issuance easier and more convenient through a direct link to the offerings board.
We will be more actively engaged with the public in social media and through digital means to more effectively serve their needs. Our goal is to open direct communications channels with the public and to be more active in educational finance. TASE is striving to become the dominant player in corporate growth in Israel and to be an effective platform in enabling investors and the public to be part of Israeli success.