JERUSALEM, Dec 5 (Reuters) – The Tel Aviv Stock Exchange said on Tuesday that a report by U.S. researchers that suggested there were investors in Israel who may have had prior knowledge of the Oct. 7 Hamas attack would have benefited, is inaccurate and its publication is irresponsible.
Research by law professors Robert Jackson Jr. of New York University and Joshua Mitts of Columbia University found that there was significant short-selling of stocks in the lead-up to the attacks – when investors bet that stock prices would fall, reflecting Israel’s ongoing war with Hamas.
The activity, they said, “exceeded the short selling that occurred during numerous other times of crisis,” such as the 2008 financial crisis and COVID-19.
They wrote that for investors in Leumi (LUMI.TA), Israel’s largest bank, 4.43 million shares sold short resulted in a profit of 3.2 billion shekels ($859 million) in the period from September 14 to October 5 .
However, the Tel Aviv Stock Exchange (TASE) said the authors miscalculated as the stock prices were quoted in agorot, which is more equivalent to cents and pence than shekels – putting the potential short selling profit at just 32 million shekels.
Yaniv Pagot, head of trading at the exchange, said that looking at short interest in Leumi, there was an increase of about 4.5 million shares in the week ending September 21 and then the position remained stable.
“I don’t see in the data anything close to what they wrote in the paper,” Pagot told Reuters, adding that the researchers had not spoken to the TASE or its members. “There was nothing unusual about short positions on the stock market in the two months before the attack.”
In a separate statement, the Israel Securities Regulatory Authority (ISA) said it did not identify any significant trading anomalies that would have required further investigation in the days leading up to the Hamas terror attack.
“The ISA’s investigations found, among other things, that the average short balances of stocks traded on the Tel Aviv Stock Exchange declined in the period prior to October 7,” the regulator said in a statement. The ISA added that its calculations showed that the value of the theoretical return on the short balance in Bank Leumi shares, which was opened about three weeks before the start of the war, was estimated at tens of millions of shekels, not three billion shekels.
Mitts told Reuters by email that the 67-page report had since been corrected, but that the currency issue had no impact on the “highly unusual” exchange-traded funds (ETF) and short-term options activity that researchers also identified.
Their report states that “short interest in the MSCI Israel Exchange Traded Fund (ETF) increased suddenly and significantly on October 2nd,” based on data from the Financial Industry Regulatory Authority (FINRA).
Pagot said he doesn’t understand “the theory about ETFs.”
He also said that the short position in Leumi was taken by an unknown Israeli bank known to TASE.
“We know that their compliance is very strict, so it is unlikely that such a position coming from a terrorist organization could pass as money laundering or something similar through that member’s compliance,” he said, referring to speculation in the media that Hamas itself was behind the short-circuit sale.
Israel’s securities regulator said it had been aware of the report for a week and was in contact with researchers, but declined to comment while it investigates the TASE’s rebuttal.
($1 = 3.7243 shekels)
Reporting by Steven Scheer, editing by Mark Potter and Leslie Adler
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