Israel probes if short-sellers targeted stocks ahead of Hamas attack: report
Authorities in Israel are investigating claims made by U.S. researchers that traders put outsize short positions on Israeli stocks and an exchange-traded fund ahead of the Oct. 7 attack by Hamas, JP reported Monday.
The Israel Securities Authority said the matter “is known to the authority and is under investigation by all the relevant parties,” according to JP.
Researchers examined trading in exchange-traded funds that invest in Israeli companies, as well as short-selling activity on the Tel Aviv Stock Exchange and options activity around Israeli firms traded on U.S. exchanges.
“Taken together, our evidence is consistent with informed traders anticipating and profiting from the Hamas attack,” wrote law professors Robert J. Jackson, Jr., of New York University and Joshua Mitts of Columbia University in a paper published on Monday. The authors emphasized the “preliminary nature” of the paper.
Citing an Oct. 2 spike in short interest in the iShares MSCI Israel Exchange Traded Fund
which tracks a broad-based index of Israeli companies, the authors said that “traders appeared to anticipate the events to come.”
The paper also said that 4.43 million new shares of Bank Leumi
Israel’s largest bank, were sold short between Sept. 14 to Oct. 5. The authors revised the paper after an Israeli news report said the initial estimate of profits around Leumi short trade were inflated due to an error around how shares are quoted.
The authors also found an increase in short-dated options contracts on shares of Israeli firms traded on U.S. exchanges expiring on Oct. 13 relative to options expiring later in the year.
“We show that this increase in short-dated options can be linked to several block trades in options written on Israeli companies in U.S. markets, suggesting that a small number of actors may have been behind this options trading,” they wrote.