A previously published report found an unusual spike in bets against Israeli securities just before the attack.
The Israel Securities Authority (ISA) said they found no suspicious trading activity in the days preceding the Hamas terrorist attack, following US researchers reporting a “significant” spike in market trade speculating on Israeli companies’ decline.
Research by law professors Robert Jackson Jr. from New York University and Joshua Mitts of Columbia University found significant short-selling of shares – when investors bet that share prices would fall – leading up to the attacks, writes Reuters.
“Our findings suggest that traders informed about the coming attacks profited from these tragic events,” the report claims.
The report, using data from the Financial Industry Regulatory Authority (FINRA), documented a sudden increase in transactions concerning an Israeli-related major exchange-traded fund (ETF) on the New York Stock Exchange (NYSE) as well as betting on the fall of share prices of numerous Israeli companies traded on the Tel Aviv Stock Exchange (TASE).
While ISA noted that it examines trading activities only in Israel, they also said in a statement that their examinations didn’t find anything suggesting “suspicious trading activity,” and in fact, their data shows a decline in these transactions.
“The ISA’s examinations found, inter-alia, that the average short balances for shares traded on the Tel-Aviv Stock Exchange declined during the period preceding October 7th,” the regulator said in a statement.
The Tel Aviv Stock Exchange condemns the report
In a separate statement, the Tel Aviv Stock Exchange (TASE) said that the report by US researchers was inaccurate and its publication irresponsible, writes Reuters.
They commented on one example in particular, documented in the research, which claims that 4.43 million shares of Leumi, Israel’s largest bank, were reportedly sold short over the period between 14 September and 5 October. The report said that the transaction yielded profits of 3.2 billion shekels (€800 million).
But TASE said the authors miscalculated because share prices are listed in agorot, which are similar to cents and pence, rather than shekels – putting the potential short sale profit at just 32 million shekels (€8 million).
Yaniv Pagot, head of trading at the exchange, said that the short position in Leumi was taken by an unidentified Israeli bank known to the TASE.
Referring to media speculation that Hamas itself was behind the short selling, he said, “We know their compliance is very strict so it’s unlikely that such a position that came from a terror organisation can pass through this member’s compliance for money laundering or something like that.”
One of the authors of the report, Joshua Mitts of Columbia University told Reuters via email that the report had now been corrected, but that the currency issue did not affect the “highly unusual” spike in transactions related to an exchange-traded fund (ETF) also identified by the researchers.
Their report said “short interest in the MSCI Israel Exchange Traded Fund (ETF) suddenly, and significantly, spiked” on 2 October, based on data from the Financial Industry Regulatory Authority (FINRA) tracking trade on the US stock exchanges.
Concerning the reported suspicious trade on the NYSE, both the US Securities and Exchange Commission and The Financial Industry Regulatory Authority (FINRA), Wall Street’s self-regulator, told CNN that they neither confirm nor deny any ongoing investigation.