Q&A with Ittai Ben-Zeev, CEO, Tel Aviv Stock Exchange (TASE)

1. Firstly, congratulations on successfully taking TASE public. Please tell us more about this very important milestone in the history of the exchange, and how it positions TASE for the future.

Indeed, in the past year TASE has achieved a significant milestone by transforming, 66 years after its establishment, into a public company that is traded on the Tel Aviv Stock Exchange since 1 August 2019. With this step, we have joined the stock exchanges around the globe that had taken similar routes years ago.

TASE IPO was carried out for the first time on the Tel Aviv Stock Exchange by way of a global offering, led by the global investment bank, Jefferies, who was the lead underwriter and global coordinator, facilitating the participation of international investors in the offering. The IPO, with a volume of NIS 225 million, was carried out as a non-uniform ("book building") offering and included primarily global investors from Europe and the United States, as well as Israeli institutional investors. Additionally, in accordance with our vision and objectives, we have worked to involve the public in Israel in the IPO. Therefore, during the public tender stage we allowed the public to purchase shares at a price identical to the price set for the institutional stage, while limiting the maximum amount of investment to approximately NIS 31 thousand in order to maximize the participation of public investors in the IPO of the Tel Aviv Stock Exchange. We were delighted to witness full demand from the public in the IPO, which we consider to be the public’s vote of confidence, both in regards to the potential of TASE for the long term and in relation to the public’s interest in partaking in the success of TASE and the Israeli economy.

I believe that by opting for a global offering of TASE, which has attracted major international investors to invest in TASE alongside Israeli institutional investors, we have paved the way for the Israeli companies, especially the high-tech companies, to offering on the Tel Aviv Stock Exchange, benefiting from the advantages of such offerings, both in terms of the value that would be available to them from global investors and in terms of investor diversity. We believe that the transformation of TASE into a public company and the dispersal of ownership such that the majority of the shares are currently held by international and Israeli investors, will allow us to continue operating as a competitive, progressive business entity and to pursue our primary role as the growth engine for the Israeli economy.

2. What are the key strategic initiatives that you’re working on at the moment?

Over the past year, we continued implementing TASE’s strategic plan of enhancing liquidity and increasing the number of stock exchange members, improving the public’s awareness of investment on the stock exchange, developing new products and upgrading the technological infrastructures, adjusting them to the international standards.

In recent weeks, we have launched a joint collaboration with the Israel Securities Authority (ISA), which is designated to bring in new players that will operate as retail brokers in the Tel Aviv Stock Exchange, as is currently practiced in other stock exchanges around the world. For this purpose, we have worked to remove barriers and update the rules for the joining of new members. The expedients that we have approved included significant expedients concerning the minimum equity requirement that represented an entry barrier for foreign entities and expansion of the list of countries of incorporation for remote membership to include all countries of the European Union, Hong Kong, Toronto and Singapore. Two international entities, Jefferies and Flow Traders, recently joined the Stock Exchange as remote members and we expect that more international members and market makers will be joining TASE. Also the recent joining of the international financial institution, Euroclear Bank, as a custodial member, is significant. By becoming a custodial member, Euroclear Bank will be enabled to directly access TASE and provide the international investors settlement and asset services for Israeli securities. I am confident that the entry of new players into the Israeli capital market and TASE will increase competition among investors, contribute to the reduction of trading costs and attract additional international investors to the Tel Aviv Stock Exchange. Additionally, a few months ago, we launched co-location services for local and international members of the stock exchange and other customers, in order to enhance low-latency and high frequency trading on TASE, with emphasis on foreign traders.

To enhance the Israeli public’s awareness of investing on TASE and increase the range of products that are available to it, we have worked towards the dual listing of foreign ETF’s. Within this framework, BlackRock, the world’s largest financial management firm, announced the first-ever launch of 22 foreign iShares ETFs on the Tel Aviv Stock Exchange. This launch was part of TASE’s strategy to allow the public exposure to the world through the Tel Aviv Stock Exchange. Additionally to further strengthen TASE’s connection with the public, we have recently signed a 3-year sponsorship agreement with the Israeli Professional Football League, which includes, among others, widespread media exposure and the branding of the Premiere League as “TASE League”. We are dedicating substantial efforts to increasing the public’s involvement and participation in the success of the Israeli economy through the capital market. Also, as stated earlier, we are working in collaboration with ISA to bring in retail brokers, which will allow the public broader access to digital trading on the Stock Exchange at reduced costs.

3. TASE, and Israel more broadly, is seen as a hub for technology. Indeed, in 2019, Israel was ranked the world's fifth most innovative country by the Bloomberg Innovation Index. How do you embed technology into the heart of your business?

Israel is indeed the start-up nation, and I believe that we can and should be rated even higher on the global index. With more than 6,500 start-up companies in Israel, we at TASE place great emphasis on becoming the stock exchange hub for technology companies. Israeli high-tech companies represent the greatest potential for us, and together with Israeli regulators, we are working to provide expedients to high-tech companies in order to bring them in to be traded on the Tel Aviv Stock Exchange. For this reason, we have also partnered in a collaboration with the Singapore Exchange (SGX), which would allow Israeli high-tech companies simultaneous offering on the market in Singapore and in Israel, with simultaneous dual listing on both exchanges. Simultaneous IPOs in both markets will help high-tech companies to get attractive valuations from investors in both Asia and Israel. Additionally, a year ago, we launched the Nominee Company as a subsidiary of TASE, which enables its traded companies, for the first time, to digitally list their securities, thereby reducing the cost to the companies. This move has led to more than 100 companies joining this service.

TASE also expects to adopt Intel’s Blockchain technology in 2020, which will make TASE the first financial institution in Israel to establish a central securities-lending pool, spearheading the development of a financial core business activity using Blockchain technology. We will allow members of the stock exchange to manage the lending of securities and believe that this introduction of an exclusively electronic platform will increase the volume of securities lending in the Israeli capital market, reduce costs and increase overall activities on the Tel Aviv Stock Exchange. Finally, the core systems of TASE are leaders in the field of cyber security and TASE itself, as a cyber defense leader, has provided consulting to the new stock exchange established in Kazakhstan in the past year. We believe that TASE will continue to promote advanced technological measures in the coming years to support the advancement of the capital market.

4. Looking ahead five years, what are the technologies that you feel will disrupt the market infrastructure industry and how is TASE equipped to handle such disruption?

It is difficult to tell what will effect TASE's core activities in five years' time. Nevertheless, I can assess that Blockchain technology will represent the most significant challenge for the capital market in terms of potential disruption. We believe that Blockchain technology is the appropriate technology for our stock exchange and therefore we have decided to establish the lending pool, together with Accenture, based on Intel’s Blockchain technology. TASE is considering ways for the advancement and adoption of this technology in other contexts as well, which could position TASE at the forefront of technology and assimilate it into the core business of the Tel Aviv Stock Exchange.

Nevertheless, as I mentioned before, as Israel is the Startup Nation and as we are part of the innovation hub, along with TASE’s huge advantage of managing in house technologies, I believe that we can hold our ground in the face of any disruption. Our self-reliance allows us to handle any technology that could potentially disrupt the capital market infrastructure technology industry.