Tel Aviv exchange eyes longer day to attract foreign investors

TEL AVIV, Dec 23 (Reuters) - The Tel Aviv Stock Exchange

(TASE) is looking to extend trading by an hour in the coming

months in a bid to attract more European investors and boost

trading volumes, Chief Executive Ester Levanon told a news

conference on Sunday.

Israel's trading day starts at 9:30 a.m. (0730 GMT) and ends

at 4:30 p.m. - two hours before European sessions finish.

"We believe we should be part of Europe and that means

trading as close as possible to European hours," Levanon said.

She proposes initially extending the day by one hour and

then assess whether it makes sense to add a second hour.

The TASE in 2009 shortened its trading day by an hour to end

at 4:30 p.m. after it became evident that the extra hour, which

also coincided with an hour overlap with U.S. markets, did not

increase turnover much.

Now, with nearly three-quarters of share trading

algorithmic, Levanon said traders will easily be able to adapt

to the longer hours.

Also, some 40 percent of the weight of the blue-chip Tel

Aviv 25 is made up of shares that are dual-listed in Tel

Aviv and on the Nasdaq or New York Stock Exchange, underscoring

the need to have some overlap with the United States.

The proposal will be brought to the TASE's board next month

and Levanon hopes extended trading day will begin in March.

After a slow start to the year, the blue-chip TA 25 is up

12.4 percent this year after an 18.2 percent drop in 2011.

TASE announced that trading volumes in 2012 had fallen 38

percent to 1.065 billion shekels ($284 million) versus a 25

percent decline in the United States and a 20-30 percent fall on

European exchanges.

Bond volumes, though, were up 9 percent this year to 4.095

billion shekels.

In the absence of any initial public offerings in 2012,

capital raising in equities was down 39 percent to 3.1 billion

shekels, while non-government bond raising slipped 7 percent to

37.9 billion shekels.

Levanon said 2012 wasn't a bad year but it was challenging

and that forced the bourse's management to make changes and seek

out relationships with foreign exchanges.

She noted that foreign investors account for just 15-20

percent of trading on the TASE.

The exchange, Levanon said, is weighing an offer to trade TA

25 index futures on Eurex, the largest derivatives exchange in

Europe in which its hours extend until the end of U.S. trading.

"There are a lot of advantages to having European and

American investors have access to TA 25 futures," she said,

adding that some details needed to be worked out but trading

could start sometime in 2013.

TASE is also waiting to hear from the FTSE and MSCI about

whether they will add the Tel Aviv exchange to their European

indexes.

Both had upgraded the TASE to developed market status from

an emerging market in 2010 but that ended up harming Israel

since passive money left but it wasn't replaced by active cash.

Levanon said the bourse approached MSCI about Israel joining

the European index, which would give European investors more

access to trading in Israeli banks, retailers and other

companies.

MSCI earlier this year said it would study the request and

that it would question investors.

Levanon estimated between $1 billion and $2 billion would

flow into Israel's market should it be included in the European

index.

MSCI has kept quiet about the process, which gives Levanon

encouragement. "I haven't heard that they gave up, so that's a

good sign," she said.

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