The TASE announced (June 11, 2017) the introduction of significant changes in the qualification conditions and admittance of companies as TASE members, as part of its strategic plan. The changes in the rules are in alignment with accepted international standards and they remove the barriers that exist today in the qualification conditions and in the admission process of companies to the TASE rules not customary in other stock exchanges around the world. This will enable the entry of new members into the TASE and the entry of other entities into the Israeli capital market, including retail brokers.
The proposed changes are in line with Demutualization Law (changing the ownership structure of the TASE), which was approved by the Knesset on March 2017. The law aims to separate ownership and control of the TASE from membership and to make trading on the stock exchange available to a large number of players. This move will increase competition among traders and the TASE expects that it will lead to a reduction in the commissions that the members collect from their clients.
There are currently a number of qualifying conditions for TASE members that serve as barriers for entities currently active in the capital market and interested in becoming members. Within the framework of the existing qualification conditions, a bank or a non-bank member (NBCM) is required to have, inter alia, the following conditions prior to acceptance as TASE members:
- At least 200 clients, as well as client securities portfolios with a total value of at least NIS 262 million.
- A non-bank member must have had, in addition, two years activity in the field of investment counselling or securities portfolio management, prior to being accepted into membership on the stock exchange.
A comparative study conducted by the TASE examined qualification and acceptance conditions for companies in various stock exchanges around the world, and revealed that none of the stock exchanges had similar requirements as a threshold condition for stock exchange members.
In accordance with generally accepted rules, the TASE intends to make changes in the qualification conditions for companies and to cancel the following requirements:
- Minimum number of clients requirement
- Minimum total value of client securities portfolios requirement
- The requirement for two years' experience in the field of investment counselling or securities portfolio management, prior to acceptance as a TASE member.
In addition, the following changes will be made in the admission process of companies as TASE members, and they will be adapted to conditions accepted around the world:
- Cancellation of the trial period requirement so that upon the approval of the TASE Board of Directors, the applicant will be immediately accepted as a TASE member.
Currently, once the approval of the Board of Directors is received and the applicant complies with all the conditions set forth in the approval, if so determined, the applicant starts activity as a candidate for a two-year trial period. During the trial period, the candidate may trade on the stock exchange, all obligations applicable to TASE members apply to it, but it is not considered a stock exchange member and cannot present itself as such. The comparative study conducted by the TASE revealed that a trial period does not exist in any of the examined stock exchanges. Acceptance of an applicant for membership in the said stock exchanges is immediate, after examination of the applicant's compliance with the conditions of acceptance. Accordingly, the requirement for a trial period will be canceled.
- Extension of the period of approval by the TASE Board of Directors for acceptance of an applicant as a member, subject to fulfillment of the conditions prescribed therein, for a period of one year from the date of granting the approval (instead of six months currently). As part of the admission process to TASE, the Board of Directors approves the request of the applicant, sometimes setting certain conditions that the applicant must meet in order to be able to start functioning as a TASE member. The approval of the Board of Directors expires if the conditions stipulated therein are not fulfilled within a period not exceeding six months.
- The new changes extend the approval to a period of one year, in order to facilitate the preparation process on the part of the applicant and in accordance with past experience.
Even after revocation of these requirements and the changes in the terms of acceptance for TASE membership, entities applying for membership in the TASE will be required to comply with various qualification and acceptance conditions, according to the type of applicant, including requirements on matters of corporate governance, insurance, IT systems, appointment of various office holders and compliance with equity and liquidity requirements (for NBCMs).
Ittai Ben Zeev, TASE CEO: "The TASE is updating the rules and aligning itself to international standards. We are opening the Tel Aviv Stock Exchange to new players, who could not be previously accepted as members. We are confident that the entry of new members with advanced technologies into the Israeli capital market will increase competition for investors and will make the Tel Aviv Stock Exchange dominant and more accessible to the public".
The changes need to be approve by the authorities.
