In October 2000, after a decade-long effort spearheaded by the TASE, Israel’s dual-listing law took effect. This legislation enables Israeli companies listed on certain foreign markets to dual-list on the TASE with no additional public filing obligations and at no cost. The dual-listing law was enacted to enable Israeli companies to dual-list, but it empowers the ISA to allow foreign companies traded on recognized international markets to dual-list as well.
This regulatory regime has made it simple for companies to dual-list. As a result, the number of dual-listings has increased, and international investors are able to trade dual-listed Israeli shares in Tel Aviv at the TASE’s low costs and extended trading hours (which include Sundays and generally days that are holidays in Canada, although the TASE is closed on Fridays, Saturdays and Israeli national holidays). Dual-listed companies get an additional trading arena for their shares, and a new investor base.
The dual-listing law exempts Israeli and other companies that are registered for trading on select large international stock exchanges, from reporting to the ISA other than pursuant to their international reporting requirements. If not for this amendment to Israeli securities law, the companies traded on the international stock exchanges would be required to submit a prospectus to the ISA, to acquire a publishing permit and to submit periodic and immediate reports in accordance with the Israeli law. In addition, the TASE has decided to exempt dual-listed companies from listing rules, maintenance regulations and listing fees.
In 2000, it was determined that the law would apply to companies traded in the United States on the NYSE, NASDAQ, and AMEX. In light of the success of dual-listing, the arrangement was expanded to apply to companies traded on the London Stock Exchange’s Main Market. Not every exchange in a foreign jurisdiction is recognized for dual-listing exemptions; AIM, for example, is not recognized. There are currently approximately 50 companies traded on the TASE under the dual-listing law (most of which are Israeli companies which then listed elsewhere), as well as additional companies whose shares are traded on the TASE and abroad (but which do not report according to the dual-listing law).
Historically, the ISA did not require mutual recognition and was satisfied with its own recognition of the standards of the foreign market (essentially a “one-way” dual-listing mechanism). In recent years, however, it is more insistent upon mutual recognition as a condition of dual-listing. The first (and only) mutual recognition agreement was signed in January 2008 between the ISA and the French Autorité des marchés financiers (AMF) (the securities authority in France).2 Under that agreement,3 securities offered by a prospectus approved by the ISA can be listed on Euronext or other French approved stock exchange without further approval of the AMF, and securities offered by a prospectus approved by the AMF can be listed on the TASE without further approval of the ISA. To date, no companies have taken advantage of the agreement. Although the agreement was signed in January 2008, amendments to Israeli securities law are only now being adopted to implement the agreement with the AMF. According to the proposal, dual-listed securities approved by the AMF and listed on a stock exchange approved by the AMF will be subject to the same TASE listing and reporting requirements that have been applicable since 2000 to dual-listed companies that are traded in the US.
Shortly after the Israeli law was passed, a research study examined the influence of dual-listing on the price and liquidity of shares, based on a sampling of 30 companies that decided to register for trading on the TASE following the change in the law. The interest of this study arose from some unique factors, including the fact that, unlike capital markets of other countries, where companies first issue their shares on the local market, then move onto foreign markets, the Israeli companies had first issued their shares in the foreign market, then in Israel. The study suggested that there was an advantage arising from both increased trading volume and higher share prices as shares registered for dual trading had a 90 per cent growth in their trading volume and, following dual registration, the price of the shares went up by about 8.5 per cent on average in the US.