Technology recasts Israels stock exchange

TEL AVIV — It is very quiet now at the Tel Aviv Stock Exchange, as it has been since the middle of October.

No more can be seen the bustle and confrontation of dealers, shouting at each other, waving sheaves of papers in outstretched arms. On the trading floor all is silent and still. The visitors' gallery now looks down on a darkened, empty hall.

All the human interaction the stock exchange once knew has been transferred to the silent, colorless world of electronic trading.

The trading floor has been replaced by the computer. The exchange itself maintains only a small "help room" staffed by four or five people who respond to problems from dealers far removed from the building itself.

The movement of prices is regulated by supply and demand, the only arbiter being the machines of technology. Deals are completed in an instant as all securities and financial instruments are transferred by means of TACT, the Tel Aviv Continuous Trading system.

Meanwhile, Israel's government is working toward amending securities regulations to make it easier and more attractive for new, emerging Israeli companies to join Tel Aviv's stock exchange.

The exchange's management is critical of the government's delay in reworking regulations to make it easier for Israeli companies now trading in the United States to also be traded on the Tel Aviv exchange.

Yair Orgler, the exchange's chairman, acknowledges that there is a "clear trend" of Israeli high-tech companies to go public abroad.

"We are trying to take steps to reverse this trend or at least reduce this phenomenon," the chairman said, noting that about 100 Israeli companies are listed in New York. Most of them are on the Nasdaq, some on the New York Stock Exchange and some on the American Stock Exchange.

Of all of them, Orgler said, only 20 are also listed in Tel Aviv.

"The valuation the Israeli companies receive on Nasdaq cannot be compared to any other market worldwide. If the company is large enough, or mature enough, they go to Nasdaq and it is difficult to blame them."

Orgler hopes that easier "dual listing" will reverse this trend. He also wants to encourage small, emerging companies to issue on the Tel Aviv Stock Exchange, as he sees the potential in the thousands of new startups. Orgler says "they want an exit so eventually some of them will be sold to U.S. companies," but hopes that trend can be filtered through Israel's exchange.

"Also we hope that more Israeli high-tech companies will submit initial public offerings in Tel Aviv first of all, and then offer abroad," he said.

In playing the market, as it stands now as both dynamic and fluid, it is hard to know what the situation will be a year from now — and that is why the exchange is looking for some affiliation or cooperation with Nasdaq.

"Given the terms and conditions in Nasdaq, we cannot compete head on," Orgler says. "We have to either cooperate with them or have the dual system. With the European stock exchanges, I believe we can compete and we try and compete. It is becoming a global market and Nasdaq is also competing now with the European exchanges."