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Designated Stock Exchange

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Designated Stock Exchange

13 July 2020

On July 2nd 2020, the Ministry of Finance published a Memorandum with respect to the proposed Securities Law (Amendment) (Designated Exchange), 5780 – 2020 (the “Amendment”). The purpose of the proposed Amendment to Securities Law is to set the basis for establishing a designated exchange in Israel, by, among other measures, removing obstacles and adapting the regulation that will apply to corporations whose securities will be listed for trading on the designated exchange.

The Finance Ministry is working to promote the trading of securities on alternative trading platforms which are not of the size of a primary stock exchange like the Tel-Aviv Stock Exchange, and that have special purpose or characteristics (“ATS”). The Ministry understand that due to the complexity, the existing requirements of Chapter 8 of the Securities Law, 5728-1968 (the “Securities Law”) regarding the licensing and supervision of an exchange are liable to make it extremely difficult to establish smaller trading platforms with particular trading characteristics. For example, trading platforms designated only for sophisticated investors (such as insurance companies, provident funds and banking corporations) or a platform using innovative technology (such as blockchain technology).

The proposed Amendment will allow the Israeli Securities Authority (the “ISA”), subject to the approval of the Minister of Finance, to exempt an entity that wishes to operate an ATS from the applicable provisions of the Securities Law, entirely or in part, or to grant an exemption subject to  conditions.  In addition, the Amendment will allow the ISA to exempt corporations that request to be traded on an ATS, from the provisions of the Securities Law, in whole or in part, or to exempt corporations from the provisions of the Securities Law subject to conditions. It is also suggested to amend the Companies Law, 5759-1999, so as to allow the granting of exemptions to a company registered for trading on an ATS, from the provisions of the Securities Law.

It is important to point out that establishment of ATS is intended to expand the possibilities for investment in the capital market for the benefit of the public, and for the benefit of companies seeking to raise finance for their operations. The opening of new financing channels for various corporations is of paramount importance, especially in times of crisis. Furthermore, the establishment of ATS will expose the Israeli investing public to additional investment sectors, such as early stage (start-up) hi-tech companies, which have only limited exposure in the framework of the primary Stock Exchange.

Our office has a specialised team with vast experience in assisting global exchanges, and companies offering alternative trading platforms. The team has direct, day-to-day contact with the Israeli Securities Authority. Likewise, our office has considerable experience in accompanying corporations and organisations in all aspects of the legislative process in Israel.

Corporates, Securities and Capital Markets Department,
Herzog Fox & Neeman

 

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