Nasdaq and Tel Aviv Stock Exchange reach pact

NEW YORK (Reuters) - A pact reached between the Nasdaq Stock Market (NDAQ.O) and the Tel Aviv Stock Exchange on Monday could pave the way for mutual collaboration on financial instruments and for a larger number of listings for each exchange, the chief of the Israeli bourse said.

Ester Levanon told Reuters the agreement is a two-way street that is likely to pave the way for collaboration on such things as financial instruments set up by both exchanges.

"We are looking at this quite seriously," Levanon said, but declined to be more specific. "We expect an announcement quite soon."

The Tel Aviv Stock Exchange's blue chip TA-25 index could soon be traded in the United States, Levanon added.

Currently it is traded only in Tel Aviv, but there are plans to change that in the near future, she said.

In addition, Levanon said, the Tel Aviv market will work with Nasdaq to boost the number of dual listings between the two exchanges.

Currently, of the 70 Israeli companies that have Nasdaq listings, about 50 also trade their shares in the Tel Aviv market. Levanon would like to close that gap.

Under the agreement, the Tel Aviv market will also encourage more of its listed companies to consider a nonpublic

U.S. listing on Nasdaq's Portal, a private placement platform established earlier this year.

More than 650 companies are listed on the Tel Aviv Stock Exchange, said Levanon. It is Israel's only bourse.

FREE FLOAT

Early next year, the Tel Aviv Stock Exchange will reset its share indexes according to the value of companies' shares in public hands.

The development, which will bring the bourse in line with practices at some other exchanges, will encourage companies to increase the amount of free float to a minimum of 25 percent.

Levanon said the exchange has gradually been raising the percentage of public float its listed companies are required to maintain in order to encourage a greater volume of trading, but does not see pushing it higher than 25 percent in the foreseeable future.

In addition to its new pact with Nasdaq, the Tel Aviv Stock Exchange also has a formal agreement to work with the London Stock Exchange, reached earlier in the year.

A large number of Israeli companies are listed on the London Stock Exchange's AIM market, Levanon said.

SHRINKING SPACE

The number of stock exchanges worldwide is rapidly shrinking as large stock markets merge with each other, or buy out smaller ones.

For example, Nasdaq and the Borse Dubai in September agreed to join forces to buy Nordic exchange operator OMX OMX.ST. As part of the deal, Borse Dubai takes a stake in the London Stock Exchange (LSE.L) and Nasdaq.

In June, the NYSE Group merged with European exchange operator Euronext, paving the way for the merged NYSE Euronext

(NYX.PA)(NYX.N).

The Tel Aviv Stock Exchange, mutually owned by its members, can only be an observer to the flurry of merger and acquisition activity, Levanon said. For the time being, Israeli securities law bars the exchange from privatization.

"We are not part of the game, but in two years time the law is probably going to change," she added.

(Reporting by Lilla Zuill; editing by Gary Hill)