Reporters told in advance of Hamas attack ‘inaccurate and irresponsible’

A report saying some investors may have known in advance of Hamas’ plan to attack Israel on October 7 and used that knowledge to make hundreds of millions of pounds is inaccurate and the publication was irresponsible, Tel Aviv has – the stock exchange said.

Research conducted by American law professors Robert Jackson Jr of New York University and Joshua Mitts of Columbia University had found significant short-selling of shares that led to the attack that triggered a war that has lasted for almost two months.

“Days before the attack, traders appeared to anticipate the events to come,” the authors wrote, citing short interest in the MSCI Israel Exchange Traded Fund (ETF), which they say “suddenly and significantly increased” on October 2.

“And just before the attack, short selling of Israeli securities on the Tel Aviv Stock Exchange (TASE) increased dramatically,” they added.

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The researchers said short-selling prior to Oct. 7 “exceeded the short-selling that occurred during several other periods of crisis,” including the 2008 financial crisis recession, the 2014 Israel-Gaza war and the COVID pandemic.

They gave the example of Leumi, Israel’s largest bank, which saw 4.43 million new shares sold short over the period from September 14 to October 5, making a profit of 3.2 billion. shekels (680 million pounds) on the additional short sale.

What is shorting?

Short sellers are investors who bet on a fall in the price of a security, in this case a stock.

They typically do this by borrowing shares in a particular company and then selling them.

If the share price falls, they will then buy back those shares at the lower price, sealing their profit.

The shares are then returned to the original investor from whom they were borrowed.

However, TASE said the authors had made a miscalculation as the share prices are quoted in agorot, which equates to pennies, rather than shekels – putting the potential profit on the short sale at just 32m. shekels (£6.8m).

Yaniv Pagot, head of trading at the exchange, said that looking at the short interest in Leumi, there was an increase of
4.5 million shares in the week ending September 21 and remained flat thereafter.

“I don’t see anything in the data close to what they wrote in the paper,” Mr Pagot told Reuters, adding that the researchers did not speak to TASE or members.

“There was nothing unusual in short positions on the stock exchange in the two months before the attack.”

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Protesters call for immediate release of Israeli hostages (file photo)
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Researcher says problem did not affect ‘highly unusual’ activity

Mitts told Reuters the 67-page report, Trade in terror?had been fixed, but the currency issue did not affect the “highly unusual” exchange-traded fund (EGF) and short-term option activity also identified by the researchers.

Pagot said he did not understand “the theory of the ETFs”.

He also said that the short position in Leumi was taken by an unidentified Israeli bank known to TASE.

“We know that their compliance is very strict, so it is unlikely that such a position that came from a terrorist organization could pass through this member’s compliance for money laundering or anything like that,” he said, referring to media speculation, that Hamas itself was behind the short selling. .

Israel’s securities regulator said it was aware of the report and the matter was “under investigation by all the relevant parties”.

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