Tel Aviv Stock Exchange: Explained

Evan Liberman Articles, Israeli stocks, News 0 Comments

Investing in Israeli stocks and bonds is done on the Tel Aviv Stock Exchange (TASE), Israel's single national exchange, though accounts at Israeli brokerages and banks. This is where Israeli corporations raise capital to finance investments and activities, and where the government bring the public into its companies as they are privatized. The state-of-the-art exchange is also home to the local investment community and securities sector.

Both Israeli and non-Israeli investors, from any country, may invest on the TASE online, and in English.

History of the TASE

Local trade in securities began in the 1930s, years before the formation of the State of Israel. Trade was carried out through the Exchange Bureau for Securities, founded by the Anglo-Palestine Bank (which became Bank Leumi Le-Israel) in 1935.

With the formation of the State of Israel in 1948, a pressing need arose to formalize trade in securities. In September 1953, a number of banks and brokerages joined forces and established the Tel Aviv Stock Exchange.

Since the mid-1990s the Tel Aviv Stock Exchange (TASE) has been adapting to meet the standards of the most advanced exchanges in the world. Physical trading floors, long abolished, have been replaced by a computerized system.

Structure

The TASE is a private company limited by guarantee. It is owned by its members, both banks and non-banking corporations such as brokerages, through which anybody may trade in the securities listed on the exchange. Trading is carried out between TASE members on behalf of their customers. The TASE operates under a license granted by the Minister of Finance. The Israel Securities Authority supervises the TASE’s activity.

TASE by the Numbers 

  • Total Market Capitalization: $515 Billion
  • Daily Trading Volume: $1.8 Billion
  • 3-year Israeli Stock Performance: 37% (General Share Stock Index, 2013-2015)
  • Mutual Funds: 1,386
  • Stocks: 460
  • Corporate Bonds: 600
  • Government Bonds: 45
  • Net International investors purchase of equities: $1.6 billion
  • High-tech companies listed: 130 (55 biomed)
  • Exchange Trade Notes (Funds): 638

Trading

Stock trading monitor

Trading of securities occurs every Israeli business day: Sunday-Thursday, between 9:00 a.m. and 5:35 p.m. Trading is divided into distinct phases of trading, with specific rules: pre-open, opening, continuous trading, pre-closing and closing auction. Market Makers began working on the TASE in 2003. Trading is performed via TASE member firms (banks, brokerages, insurance companies), who transmit orders to the central exchange on behalf of their customers. TASE members’ central computers are connected to the trading computer, so that branch employees can transmit orders online. Most TASE members enable their customers (investors) to transmit trading orders via the Internet and through other computerized means, in English or Hebrew.

Survivability and Backup

Extensive efforts have been invested in planning and constructing the TASE’s computer system, in order to ensure that it is always available for TASE members to transmit their customers’ orders quickly and efficiently, and to provide service without malfunctions and interruptions.

The TASE has established a sophisticated survivability structure for its computerized systems as well as the communications and electrical networks serving their system. The backup structure includes a “hot backup” facility located off-site, at a distance from Tel Aviv, at which trading and clearing can be carried out in the event that they cannot be performed on TASE premises.

Order Size

The minimum order size is the smallest trading unit in securities on the TASE. In equities, the minimum is one share; in warrants, one trading unit of a warrant; in convertible bonds, one NIS par value.

Circuit Breakers

As in all major exchanges around the world, when necessary, the Tel Aviv Stock Exchange exercises "price monitoring" and "circuit breaker" mechanisms in order to mitigate volatility on a given trading day. When the Tel Aviv leading stock index (Tel Aviv-25) fluctuates sharply, opening trading is postponed or trading is halted, as applicable.

Order Types

The following types of buy and sell orders may be submitted:

  • Market orders (MKT) – A market order is an order submitted without a designated price limit
  • Limit orders (LMT) – A Limit order is submitted with a stipulated price limit
  • Limit-at-Opening orders  (LMO) – A Limit-at-Opening order is submitted with a stipulated price limit. A LMO order, or part of it, which is not executed during opening trading is automatically cancelled.
  • Stop-Limit orders (STL) – A Stop-Limit order is a Limit order submitted with a condition attached
  • Iceberg orders (ICE) – An Iceberg order is an order submitted in 3 portions for execution: the total volume, the first peak and an additional peak designated for display
  • Fill or Kill orders (FOK) – A Fill or Kill order is a Limit order for full immediate execution. An order not executed in full or immediately is automatically cancelled and is not listed in the order book.
  • Immediate or Cancel orders (IOC) – An Immediate or Cancel order is a Limit order for immediate execution, even if the execution is partial. An order, or part of it, which is not executed immediately is automatically cancelled and is not listed in the order book.
  • Limit-at-Closing orders  (LMC) – A Limit-at-Closing order is submitted with a stipulated price limit,. A LMC order, or part of it, which is not executed during closing trading is automatically cancelled.

Financial Products

The Tel Aviv Stock Exchange offers a wide variety of investing options. All are traded electronically online. An interesting feature of the TASE is that Israeli corporate and government bonds, which have a 1 NIS minimum, are all traded online with small spreads and low commissions. This compares favorably to the U.S. market, where bonds are traded over-the-counter, incurring large spreads (hidden fee), high broker commissions, and high minimums. The following is a list of investment choices in Israel:

  • Stocks
  • Convertible Securities
  • Fixed Income
    • Corporate Bonds
    • Government bonds
    • Structure Notes
    • Certificates of Deposit
  • ETNs
  • Mutual Funds
  • Treasury Bills
  • Index Options
  • Stock Options
  • Futures
  • Currency Options
  • Derivatives

Types of Listings

The following types of securities are listed on the Tel Aviv Stock Exchange:

  • Initial Public Offering (IPO)
  • Follow-on Offering
  • Dual Listing (usually with Wall Street exchanges - NYSE, NASDAQ or AMEX - or on the London Stock Exchange)
  • Private Placements

Regulation

Israel’s single capital market exchange is strictly regulated by the following bodies:

  • Bank of Israel
  • Legislation: the Knesset
  • Israel Securities Authority
  • Ministry of Finance
  • TASE rules and Regulations

Sources: TASE, Bank Leumi: data as of February, 2016

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