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Changes are afoot that would open the underwriting market to greater competition and squeeze the banks' own underwriters from their dominant roles.

Currently, the market is led by Leumi and Partners Underwriters, Poalim IBI and Discount Capital Markets, all subsidiaries of the major banks.

At a meeting of the Securities Authority at the end of last week, the authority decided that an underwriter cannot lead a stock issue, or underwrite more than 15 percent of an issue, if the issuing company holds a large debt toward it. That is, if a company owes a bank more than 15 percent of its equity, then the bank's underwriters cannot manage the stock issue or commit to buying more than 15 percent of the sale.

Under such terms, the three large banks' underwriters would not have been able to manage El Al's stock flotation earlier this year. El Al owes large sums to the three banks, and each bank underwrote 19 percent of the sale.

In addition, the general assembly of the Securities Authority decided that a company must disclose its debt to the underwriting group in the prospectus accompanying the issue, according to two categories: If the underwriter has committed to more than 5 percent of the issue and if the company's debt to the group exceeds 5 percent of the company's equity; or if 5 percent or more of the proceeds from the stock issue are intended to pay off loans to the underwriter's group.

Similar regulations apply today, but the limit is far higher - at 25 percent, both of the stock issue and the debt ratio. The authority reached the conclusion that this level is too high to have an impact, and that the dominance of the banks in underwriting has pushed out smaller, private concerns, which both stifles competition and raises questions of interest. Some claim that the banks - through the use of the underwriting companies, serving the banks' own interests - may have held back the privatization of state-owned firms.