Israel has only ever had a single stock exchange – the Tel Aviv Stock Exchange. Indeed, the provisions in the Securities Law, 1968 which deal with the licensing and supervision of a stock exchange were drafted on the basis of a concept of a central, national exchange, the volume of trading on which would cause it to be a key component in the Israeli capital market.
However, the Israeli government has recognised the need to increase flexibility and opportunity in the market, by encouraging trading via platforms which would not be of the size of the central exchange, and which would have specific characteristics.
For example – an exchange which would be open only to sophisticated investors, such as insurance companies, pension funds and banking corporations, or an exchange which would operate via advanced technologies (such as blockchain).
With this in mind, the government published, earlier this week, a draft amendment to the Securities Law which would deal with “dedicated exchanges”. The establishment of a legal framework which would enable the setting up of such targeted exchanges with unique characteristics would be intended to promote the expansion of options for investment in the capital market, for the benefit both of investors and for companies seeking to obtain financing for their activities – of particular importance in the current era of corona.
The proposed amendment would permit the Israel Securities Authority, with the approval of the Minister of Finance, to exempt an entity wishing to operate a dedicated stock exchange from all or part of the regulatory requirements associated with the setting up of an exchange.
In addition, the amendment would authorise the Minister of Justice to exempt companies seeking to trade on a dedicated stock exchange from all or part of the extensive provisions of the Companies Law which apply to traded companies.
In order to qualify as a dedicated stock exchange, an exchange would have to meet one of the following criteria: that trading thereon would be limited to sophisticated investors, as defined in the Securities Law, that it would be an exchange with innovative characteristics, including as to trading technology or trading infrastructure, contributing to the innovation and development of advanced infrastructures, or that it would be an exchange which would be defined as such due to the trading volume thereon, the number or value of the companies or the types of securities traded thereon.
The full version of the draft law, with explanatory notes (in Hebrew) can be found here.