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Israeli Regulation at Fault as Volumes Drop, Bronfeld Says

Israeli regulations and slowing economic growth are responsible for a decline in volumes and listings on the Tel Aviv Stock Exchange, outgoing Chairman Saul Bronfeld said.

Bronfeld, who resigned last month, said he was forced out of his role along with Chief Executive Officer Ester Levanon in a move akin to a “hostile takeover.” The former chairman called on the Finance Minister to consult with companies, banks and investors on the reasons for the retreat in flows at the TASE, as the bourse is known.

“The decline in volume and prices on the Tel Aviv bourse is due to excessive regulation and the change in the pace of economic growth, not the operations of the bourse,” Bronfeld said in an interview at the Tel Aviv bourse’s office today. “My resignation is a wake-up call for Jerusalem,” he said, referring to the government’s headquarters.

Trading volume on the benchmark TA-25 Index has plunged since May 2010 when MSCI Inc. raised Israel’s stock market to developed-market status from its earlier emerging-market rank. Volume dropped 44 percent from the start of 2010 to the end 2012, compared with an 18 percent average global retreat, the Bank of Israel said in a March 12 report. Prime Minister Benjamin Netanyahu’s government has initiated reforms in the telecommunications, banking, gas and chemical industries to boost competition in the market.

Excess Regulation

The Tel Aviv bourse has been struggling to lure Israeli companies listed on Nasdaq, including SodaStream International Ltd. and Caesarstone Sdot-Yam Ltd., to list in Israel due to the excess regulation they would be facing, according to Bronfeld.

Sharona Mazalian Levi, a spokeswoman for the Israel Securities Authority declined to comment. New management will “strengthen the bourse,” the regulator’s Chairman Shmuel Hauser said last month in in response to Bronfeld’s resignation.

The benchmark TA-25 Index has gained 1.5 percent this year, compared with a 20 percent advance for the Standard and Poor’s 500 Index. The Tel Aviv gauge dropped for the first time in four days, losing 0.4 percent to 1,203.65 at the close in Israel. The Bloomberg Israel-US Equity Index of the largest U.S.-traded Israeli stocks rose for a fourth day, increasing 0.2 percent to 98.06 at 10:59 a.m. in New York.

“There is no immediate danger to the Tel Aviv bourse today but this is the time to make changes to regulation,” said Bronfeld. “My worry is not about the coming months or year but where the bourse will be in five to 10 years.”

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