Prof. Shmuel Hauser, Chair of the Israel Securities Authority: “The stock exchange in Tel Aviv is no longer a monopoly, and we have to allow it to compete efficiently with other stock exchanges. These are markets that have the same high standard of regulation as Israel, and dual-listing may promote trading in the TASE. Among other things, we wish to expand the current dual-listing arrangement with exchanges in the US and the UK to additional exchanges in Singapore, Hong Kong, and Toronto, in view of Israeli companies’ interest in trading on those exchanges due to their business ties to these markets or their recognition of the attractive capital raising potential that these exchanges offer.”
The ISA plenary approved the Chair’s proposal to extend the dual-listing arrangement to include the following three Exchanges: Singapore, Hong Kong, and Toronto.
The dual-listing arrangement that came into force in 2000 in response to worldwide globalization, allows companies whose securities are listed for trade on certain foreign stock exchanges to list their securities for trade also in Israel, based on disclosure according to the foreign law that applies to them, rather than Israeli law. This arrangement is based on the understanding that nowadays companies are driven by globalization to trade on more than one market, while financial markets are competing to attract major international companies.
Israeli companies have recently expressed interest in dual-listing in Far Eastern markets including Singapore and Hong Kong, due to their business ties to these markets or their appreciation of the capital raising potential that these markets represent. Similar interest has also been expressed with respect to the Toronto stock exchange.
According to the Protecting Minority Investors Indicator published by the World Bank, Singapore is ranked first of over 190 countries covered by the Indicator, while the Hong Kong and Toronto exchanges are ranked third and seventh, respectively.
Against this backdrop, the ISA conducted a comprehensive study of the financial markets in these three countries with the aim of extending the dual-listing arrangement. ISA staff held meetings with representatives of the foreign exchanges, regulators, and other senior officials in the three countries, to learn about the regulatory framework in these markets, and to confirm that the standards of regulation in those markets are on par with the regulation in the existing dual-listing exchanges, and will provide appropriate protection for the investor public.
Extending the dual-listing arrangement is also aimed at promoting the “return” of Israeli companies to trading on TASE, and also allow non-Israeli companies that are already listed on the exchanges in question to list for trade on the TASE as well. The ISA intends to continue promoting collaborations in this field through actions such as establishing foundation for mutual recognition of markets.
The dual listing arrangement has been used extensively since its establishment. There are currently 60 dual-listed companies that trade both on the TASE and on exchanges in London or New York. In recent years, these companies have accounted for between 40% to 60% of the total market cap of the TASE, and over 50% of the value of its TA-35 Index, and are responsible for a considerable share of the TASE’s trading volume. Most of the dual-listed companies were not traded in Tel Aviv prior to the dual listing arrangement, and were motivated to do so by it.
The proposal will come into force subject to the approval of the Ministry of Finance and the Knesset Finance Committee.