Hauser C'tee to recommend adoption of "market makers" method

The Hauser Committee, headed by Professor Shmuel Hauser and established by the Securities Authority at the initiative of Authority chair Miri Katz on the use of trade through market makers on the Tel Aviv Stock Exchange, is expected to publish its conclusion in the next few weeks. Information obtained by TheMarker indicates the committee will recommend the adoption of securities, bond and derivatives trading through "market makers".

TheMarker has also learned that the decision is acceptable to the Minister of Finance, Bank of Israel, the Securities Authority and the Tel Aviv Stock Exchange, so it is expected to be implemented in the next few months. Implementation would require the approval of the Securities Authority chair, the exchange and the Knesset Finance Committee.

As part of a joint effort to increase liquidity on the bourse, the entities examined adopting the "market makers" method used by U.S. exchanges. The Hauser Committee included representatives of all four economic entitites.

According to the "market makers" method, buying and selling is done via brokers who hold the securities and are obligated to publish ask and bid prices at any given moment. It is therefore impossible for shares in which the method is used to lack buyers or sellers at any time.

Market sources do not see the method as a replacement for the continuous trading method but as complementary.

The committee is expected to recommend two methods for trading via market makers, one for trading in corporate securities and the other for trading in government bonds. For corporate securities, the committee is expected to adopt the U.S. method in which the market maker is obligated to publish ask and bid prices and maintain a minimum offer volume.

For government bonds, a tender will be published for institutional players who meet stringent requirements set by the treasury, Bank of Israel and the securities Authority. The tender will offer large blocs of bonds that include both more and less easily traded goods. The tender winner will be the sole trader in those blocs.

It is estimated that not all bonds will be included and those that are not particularly liquid will not be included at all.