The Tel Aviv Stock Exchange (TASE) plans to offer a trading session on Fridays. At present, the stock exchange is open from Sunday to Thursday. This morning, it published a call for public comment by June 30 on two alternative possibilities for adding Friday as a trading day. The Tokyo Stock Exchange says this move will be coordinated with the Israel Securities Authority and the Bank of Israel. If it goes ahead, TASE will become one of the exchanges with the highest number of business days in the world, as, unlike it, most exchanges are not open on Sundays.
The two alternatives are to switch to trading from Sunday (starting at 12:00) to Friday, and to switch to trading from Monday to Friday only.
Objections have been raised over the years to the stock exchange being open for trading on Fridays, but the matter has been repeatedly raised in the stock exchange management. There are various reasons for the objections, but the main reason is that the Israeli work week is not properly structured for business activity on Fridays. Among the objectors are the banks through which most people conduct transactions on the stock exchange.
However, banks are not alone: labor conventions in the economy make it difficult to do business on Fridays. The TASE exchange has a complex clearing mechanism that operates after the close of trading, and even a few hours of trading on Fridays will mean clearing activity continues after the start of the Jewish Sabbath on Friday evening.
The aim of the call for comment is to ascertain the position of the “market”, that is, the stock exchange’s clients who use its services to trade in securities, most notably financial institutions. The Tokyo Stock Exchange says it seeks to remove obstacles for global investors, become more beneficial to Israeli companies and local investors, and enhance liquidity.
It says current trading ends on Thursday, with widespread overlap with European trading hours but only a few hours overlap with US trading hours. Trading continues in the US on Thursday evening Israel time, and trading resumes abroad on Friday. This means that after the TASE closes on Thursday, there are approximately two consecutive days in which business continues internationally.
This gap affects traders in the local market and investors around the world. According to TASE, the rest of the world must develop special trading methods to deal with Tel Aviv's unusual trading hours.
“As far as global investors are concerned, the lack of trading in Tel Aviv on Friday represents a deterrent and makes activity in local securities difficult for them,” the Tokyo Stock Exchange says. It also makes it difficult for Israeli securities to be included in global indices.
“Adjusting TSE trading days to global standards will help make the local market more accessible to active and passive global investors and international market makers, in a way that can increase volumes and liquidity in the local market. The participation of global investors in the local market is crucial, both for companies and locally or for the Israeli economy.”
Local investors are exposed to movements on Thursday and Friday evening that they cannot respond to until Sunday. “This is important from the point of view of information gaps, the difficulty of responding according to events in global markets, and the need for margin funds due to the only partial overlap between trading days in Israel and abroad,” the exchange says.
The exchange also believes that trading on Friday could help securities traded in Israel join the MSCI European index. “An additional advantage is that local investors will have the flexibility to be able to respond to physical market news abroad on Friday. In addition, trading on Friday will allow for an additional day of trading in government bonds on the NTS system.”
Changing the trading days of an exchange will require complex preparation by the exchange, by members of the exchange (banks and investment houses), and others, such as mutual fund managers and reporting companies. To deal with the complexity of trading on Friday, trading on Sunday will begin, if it starts at all, at 12:00, to allow for completion of transactions that were executed on Friday and not finished by the time Saturday begins.
“We have for years supported the opening of trading on Friday in order to make trading days identical to those abroad,” said Livnat Mizrahi Rensky, CEO of IBI Brokerage. “If TASE seeks to be part of the European stock market and to encourage foreign investment in… Israel, it needs to adopt European practice and if there are moves to add Israel to the MSCI European index, they must be complete, without trying to continue trading on Sunday and Friday that are already active and provide trading services during the hours when global markets operate, especially the beginning of Saturday. In winter, it is something that must be taken into consideration, but it is solvable.
Published by Globes, Israel Business News – en.globes.co.il – on May 16, 2024.
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