TASE-traded companies too small to undertake the onerous registration process required to trade on the major US stock exchanges were presented with a new option - the OTCQX - on Sunday.
"This is really the first step that companies can take towards being listed on the NYSE or Nasdaq, and it will allow them to get their feet wet and then decide if trading in the US is a good idea for them or not," Stephen Nash, vice president of capital markets at California-based investment bank Merriman, Curhan and Ford, which is administering the trading platform, told The Jerusalem Post.
Patterned after the London Stock Exchange's successful AIM system for small companies, OTCQX is structured to allow shares of foreign companies already trading on their home exchanges to trade in the US via American Depository Receipts without the frustration of a regular listing as companies listed on the OTCQX are not required to comply with the arduous Sarbanes-Oxley legislation. Additionally, OTCQX's "streamlined" listing process costs only $200,000, as compared to about $3 million when listing on the New York Stock Exchange or Nasdaq.
"This market is perfectly suited for Israeli companies and they fit exactly what we are looking for, which are companies we believe are high growth and fast growing," Nash said.
Some 142 Israeli companies currently trade in the US, 75 of which are on the NASDAQ, a number some may consider low given the very active local hi-tech market.
"We think it has a lot to do with the very difficult registration that the Securities and Exchange Commission requires of companies before they are allowed to trade in the US," said Alex Bernstein, managing director of Merriman's Israel/Technology branch.
While companies on the OTCQX, or QX as it is known, are not subject to the demanding regulations of the SEC, they are required to designate a "principal American liaison," or "PAL," a service offered by Merriman, Deutsche Bank, Citibank and Bank of New York, before they are allowed to start trading.
Since the market's launch in March, listings have tripled from the original six companies and include several multi-billion dollar companies such as the British energy giant BG Group Plc and Wal-Mart de Mexico.