The Israel Securities Authority and the Israel Innovation Authority have selected five Fintech companies to participate in their Data Sandbox pilot program. The program is designed to promote Fintech companies in Israel as part of a strategy led by the Securities Authority to develop a capital market that is innovative, competitive, attractive and accessible for investors. The Securities Authority sees great importance in collaborating with regulated entities by meeting the real-world needs of the industry. Such collaboration offers significant impetus for advanced technologies implementation by the ecosystem, with tremendous benefits for investors.
The five companies were chosen following a call for proposals, and a selection process lasting approximately six months. The companies selected offer solutions in a variety of areas such as liquidity provision, digital tools for verification and authentication, identification of trading anomalies, solutions for portfolio investment managers and more. These solutions help meet the many challenges faced by the Securities Authority and the capital market – for example bolstering Stock Exchange liquidity, improving compliance processes while reducing affiliated costs, making data accessible for regulated entities, and more.
The Data Sandbox initiative offers a direct interface between regulators, regulated entities and high-growth Fintech companies. Companies participating in the project may gain access to the databases of the Israel Securities Authority and the Tel Aviv Stock Exchange (TASE), with significant added value in developing advanced Fintech platforms. The pilot program is a unique collaboration between the Securities Authority, the TASE and the Innovation Authority, and was launched with the support of the Israeli Ministry of Finance.
The companies selected:
Zirra.Co Ltd. – Translation of alternative, non-financial data and use of AI to assess risk level of investments. Zirra.Co Ltd. will offer a unique customized grading model that supports investment decisions. The pilot will be conducted in collaboration with leading investment house Altshuler Shaham. This model is extremely important for enhancing the Israeli capital market as an innovative tool allowing the integration of quality alternative data into investors’ decision-making processes. An additional pilot will be carried out with the Israeli Securities Authority focusing on identifying precise and high-quality alternative data relevant to corporations reporting in Israel. This pilot also has the potential to improve the regulation and enforcement capabilities of the Securities Authority.
Scanovate Ltd. – The company will establish a SAAS Identity Provider on a cloud for Israeli investment houses’ clients. The pilot will be conducted together with Altshuler Shaham and will result in a digital identification system capable of replacing physical identification, as is currently required for a variety of financial procedures. This may assist with advancing the Israeli investment sector into the digital age, lower costs of client acquisition and allow a wider variety of customers access to investment firms’ services. The company’s technology for remote identification is already being used by a number of large financial institutions through ON PREM configuration on their servers. The Israeli investment industry includes a large number of smaller entities which cannot afford the costs of installing such systems on their servers. Establishing this product in the cloud will allow any regulated entity to utilize the product according to its needs and thus increase competition in the investment sector. The pilot will also help assess significant regulatory issues, including how to secure and save data.
Correlt Capital Ltd – The Israeli capital market in general and Exchange Traded Funds (ETF) in particular are experiencing low liquidity and competition. For example, four out of five Israeli companies that issue ETFs are also the sole market makers in the funds they themselves have issued. Correlt Capital is a technology company specializing in the development of trading and liquidity provision systems. The company will operate a proprietary liquidity provision system with significant technological and competitive advantages compared to existing solutions, thus providing a solution to a number of significant challenges outlined in the project’s call for proposals – for example, bolstering stock exchange liquidity. The system can also facilitate increased competition in the local capital market, with significant improvements for the investing community.
In addition, as part of its enforcement activities, the Securities Authority routinely monitors trading activities of the Stock Exchange. Technological developments in this area may assist the Authority in reaching its goal of promoting a better capital market. To this effect, two companies were selected to conduct a pilot with the Authority while using trading data received directly from the TASE. Fintica AI Ltd. will use Artificial Intelligence (AI) and Wizsoft (Israel) Ltd., which provides ERP solutions and operates machine learning and data mining systems, will run algorithms for the pilot. The collaboration with the two companies will enhance the Authority’s existing capabilities of identifying trading anomalies and irregularities.
Anat Guetta, Chairwoman of Israel Securities Authority: “The Pilot Program, which will begin its operations soon, is part of the Securities Authority’s strategy to develop and enhance the Israeli capital market and encourage entities it regulates to collaborate with Fintech companies and their advanced technological solutions for the benefit of the Israeli financial consumer. The path to achieving this goal lies primarily in sharing the knowhow and data accumulated by the Authority along with additional regulatory entities with Fintech companies which offer technological solutions for the capital market, and to guide the pilot process while providing solutions for regulatory issues.”
Aharon Aharon, CEO, Israel Innovation Authority: “The goal of this pilot program with the Israel Securities Authority is to allow local high-tech companies to implement their technology for the benefit of the Tel Aviv Stock Exchange and capital market, thus improving the market-readiness and market penetration of their products while also providing solutions to the challenges faced by the Israeli economy. The high demand for this program and the variety of solutions that were submitted and selected highlights the importance of this program and collaboration between the Israel Innovation Authority and Israel Securities Authority. As a result, we have decided upon an additional call for proposals which is currently open for submissions, scheduled to close later this year.”