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Market Makers
Market making is a mechanism designed to provide liquidity for securities, in order to facilitate buying and selling by investors, in accordance with TASE rules. Market makers operate under the existing Tel-Aviv Continuous Trading (TACT) system rules, with no priority whatsoever over other investors in terms of trading or information, as in most European markets. Studies conducted abroad and in Israel indicate that increased liquidity of securities increases their value.
Market making is the introduction of buy and sell orders (quotes) into the order book subject to maximum spread and a minimum amount authorized / permitted, throughout all trading hours on TASE. Market makers’ activity allows other investors to buy or sell securities relatively easily, in the confidence that in the future, when they wish to realize their investment, the market will be able to absorb the supply or demand that they generate. The activity of the market makers is based on the recommendations of the 'Hauser Committee', which was appointed by the Chairman of the Israel Securities Authority, with representatives from the Ministry of Finance, the Bank of Israel and the TASE, and recommended the manner in which market makers will be integrated into the securities and corporate bond markets (to be appointed by the companies listed on TASE) and derivatives (to be appointed by TASE). The TACT system was adapted to the integration of market makers in trading in all types of securities in 2003.
Market Makers in Securities or in Corporate Bonds
A market maker in securities or in corporate bonds may be a TASE member or a subsidiary thereof. A company may not act as a market maker in securities issued by it or by a corporation that controls it, or by a corporation that it controls, or by a corporation that is controlled by a controlling shareholder in the company. The company and the market maker agree upon the terms of the contract, including the payment of the company to the Market Maker, and then request TASE approval.
Market Makers in ETNs
A market maker in ETNs may be a TASE member, a subsidiary of a TASE member, a company issuing ETNs and any other financial entity. Today, market making exists in most of the ETNs traded on the TASE, and it is carried out by subsidiaries of the companies that issue ETNs. The parameters for market making in ETNs - quantity and margin - depend on the type of ETN and underlying asset, all according to the commitment taken on by the issuers of the certificates.
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 | Market Makers FAQ |  |
| |  | | What is a Market Maker? |
| | A securities market maker is a TASE member who transmits buy and sell orders (quotes) during trading on TASE at a maximum spread and in minimum quantities determined by TASE. In doing so, the market maker provides liquidity in the securities in which it operates, allowing investors to buy or sell the company's securities at any time. A market maker in derivatives traded on the stock exchange may be a financial entity with a minimal level of activity in the field. | |
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| | | | | | Why is Market Making Worthwhile for a Company? |
| | The market maker increases the liquidity and tradability of a company's securities, and studies conducted worldwide and in Israel have proved that increasing the tradability of securities raises their prices. | |
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| | | | | | Who can be a Market Maker? |
| | A market maker may be TASE member or a company controlled by a TASE member, provided that the market maker or controlling shareholders therein are not the controlling shareholders of the company.
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| | | | | | How does a Market Maker Operate? |
| | In the course of trading on the TASE, the market maker submits buy and sell orders, the margin between which does not exceed the rate set by TASE, and in a quantity not lower than the set amount. The orders are submitted during the opening trading phase and at least 80% of the continuous trading phase time. Appropriate threshold rules are determined for each group of securities or for each derivative.
For example:
- For shares included in the TA-90 index, the market maker must submit buy and sell orders for a monetary compensation of NIS 6,000 and a margin of up to 3%.
- For shares included in the TA-SME60 Index and TA-Growth index, the market maker must submit buy and sell orders for a monetary compensation of NIS 3,000 and a margin of up to 5%.
- For Corporate Bonds, the market maker must submit buy and sell orders for a monetary compensation of NIS 20,000, and variable time to redemption margin (2.5%-4%).
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| | | | | | How is a Market Maker Appointed? |
| | A company can enter into an agreement with any TASE member and appoint him as a market maker in its securities. The company and the market maker agree upon the terms of the contract between them, including the payment of the company to the market maker. After the agreement with the company, the market maker requests TASE's approval for operation as a market maker.
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Market Makers and Market Making Securities
Many companies have appointed a market maker for their securities. Most of the market making is done in shares, but some of the companies have also appointed market makers for the bonds they have issued.
Three market makers operate in the TASE in securities and corporate bond trading:
- IBI
- Excellence
- Meitav-Dash
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