Move over Tel Aviv, Haifa reportedly seeks its own stock exchange

Move could complicate the TASE's plans for growth; agencies lay out framework for 'plain vanilla' securitization market.

By NIV ELIS
Beit Hazikuk in Haifa is the country’s largest oil refinery. (photo credit: Wikimedia Commons)
Beit Hazikuk in Haifa is the country’s largest oil refinery.
(photo credit: Wikimedia Commons)
The Haifa municipality is reportedly planning to initiate plans to open its own stock exchange to compete with Israel's sole exchange in Tel Aviv.
According to Globes, Haifa will publish a tender in the coming days for building their exchange, which will focus on high-tech companies and
The Finance Ministry, which would have to approve such a step, said no formal requests had yet been made.
Should the plan move forward, it could complicate the Tel Aviv Stock Exchange's plans for growing. Already, most Israeli companies choose to either go public in foreign exchanges or sell to foreign buyer instead of listing on the TASE. Part of that has to with the size and depth of the markets.
In an interview with The Jerusalem Post earlier this year, TASE CEO Yossi Beinart said that his vision for the exchange required "understanding the role of a small exchange in a country of 8-10 million people. I think the answer lies in specialization of size and sector." His stated goal was 100 companies going public here in five years, and a doubling of trade volume.
The Haifa exchange would pursue a similar strategy, and could end up spreading Israel's capital base thin.
Agencies lay out framework for 'plain vanilla' securitization market
Meanwhile, financial regulators on Sunday released interim recommendations on how to develop Israel's securitization market, as reports surfaced that Haifa was planning on building its own stock exchange to compete with Tel Aviv's.
The public became familiar with securitization--the practice of bundling up debt and selling it through other instruments--after the 2008 global financial crisis, in which inaccurately rated, securitized sub-prime mortgages played a central role. Israel, which suffered relatively little in the financial crisis, is known for its conservative financial and banking regulation.
Accordingly, the report said that Israel should build legal certainty and regulation for "only plain vanilla (traditional) securitization transactions," and not the more complex vehicles that were abundant in the US before the financial.
Despite possible downsides, securitized debt can also play a positive financial role, spreading risk, increasing investment diversity, and helping credit flow in a market, which can boost the real economy.
"Securitization makes it possible to transfer liabilities and risks to the capital market, and makes sources available for granting new loans by the banking system, by improving the accessibility of small and midsized businesses to funding sources," read the report by a joint team comprised of representatives from the Israel Securities Authority, Justice Ministry, Finance Ministry and Bank of Israel.
While securitization markets play major roles most advanced economies' capital markets, they are "practically nonexistent" in Israel, the report noted. Israel ranked 54th of 59 in a World Economic Forum ranking of securitization market size.
One of the ways regulators hope to keep lenders accountable instead of making bad loans they can easily unload onto other investors is by requiring them to keep 10% of the loan themselves. It also recommended keeping taxes "neutral" as to not create skewed incentives for securitizing.