February 20, 2017 / 3:07 PM / 5 months ago

Tel Aviv bourse reform inches closer with finance committee's nod

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TEL AVIV, Feb 20 (Reuters) - Israel took a major step towards removing the Tel Aviv Stock Exchange from the control of the country's banks on Monday when its parliamentary finance committee approved a reform plan.

A final vote by Israel's full parliament on the proposal to make the banks sell their TASE shares within five years so each holds no more than 5 percent, is expected in the coming days.

Israel's banks will be limited to holding no more of 35 percent of shares in the demutualised bourse, down from 71 percent in an effort to bring it into line with other exchanges.

"This is an important reform that should boost the volume of trade in the capital market and strengthen Israel's economy," Moshe Gafni, head of the committee, said.

The TASE has struggled for years to revive flagging listings and volumes, despite attempts to reform.

The proposed new ownership structure, combined with changes to the oversight of the exchange, will lead to more competition, a cut in trading fees and greater liquidity for the business sector, Finance Minister Moshe Kahlon, said.

"The stock market has been crippled by the bank's burden on competition and on trading fees for their own benefit," he said.

Along with more than 200 de-listings over the past decade, TASE volumes have slumped and averaged 1.27 billion shekels ($343 million) in 2016, down from 1.45 billion in 2015 and 2 billion a day in 2010.

Under the plan, announced in 2014, member brokerages and Israeli and foreign banks including Citigroup, UBS and HSBC would become shareholders. Most stock exchanges in Western countries have adopted for-profit structures in recent decades.

The new legislation also expands the government’s regulatory oversight, with the chairman of the Israel Securities Authority (ISA) granted the power to veto senior appointments to the bourse and fire senior management.

Shmuel Hauser, chairman of the ISA, said the bill will bring TASE up to speed with the most advanced bourses in the world.

Despite opposition from Kahlon, Gafni said he intends to introduce additional legislation to reduce taxes on the stock exchange's earnings in an effort to attract more investors.

The TASE began 2017 with a new chief executive, Itai Ben-Zeev.. Earlier this month, the TASE revamped its indexes, adding 10 more companies to its blue-chip index. ($1 = 3.7060 shekels) (Reporting by Yuval Ben-David; Editing by Steven Scheer and Alexander Smith)

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