Israeli stock traders had advance knowledge of Oct. 7 Hamas attack

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Note the date, December 2023. A search today for “Did Israeli short-sellers anticipate Oct. 7 Hamas attack?” gets a lot of articles from that time. Nothing more recent except stuff like this: Two years later, answers emerge on how US, Israel missed warning signs before Oct. 7 Hamas attack. Another one of those Israeli investigations that went nowhere? Like all the investigations of Israeli war crimes in Gaza.

Traders made millions shorting Israeli companies before October 7 attack – The Jewish Chronicle – The Jewish Chronicle

Israeli authorities are investigating claims that some traders may have known about Hamas attacks before they happened

December 5, 2023 17:09

(JNS) Israeli authorities are investigating a claim by two researchers in the United States that traders possibly knew in advance about the Hamas attack of Oct. 7 and profited from the massacre.

The report by law professors Robert J. Jackson Jr. of New York University School of Law (NYU Law) and Joshua Mitts of Columbia Law School found a sharp rise in short-selling of Israeli stocks in the weeks leading up to the attack, in which thousands of Hamas gunmen stormed the border, murdering 1,200 people, wounding more than 5,000 and taking 240 hostages back to the Gaza Strip.

“Days before the attack, traders appeared to anticipate the events to come,” they wrote in a 66-page report. They cited a sudden and significant spike in short interest in the MSCI Israel Exchange Traded Fund (ETF) on Oct. 2 based on data from the Financial Industry Regulatory Authority (FINRA).

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

The Israel Securities Authority told Reuters that “the matter is known to the authority and is under investigation by all the relevant parties.”

The researchers wrote: “Although we see no aggregate increase in shorting of Israeli companies on U.S. exchanges, we do identify a sharp and unusual increase, just before the attacks, in trading in risky short-dated options on these companies expiring just after the attacks.

“Our findings suggest that traders informed about the coming attacks profited from these tragic events, and consistent with prior literature we show that trading of this kind occurs in gaps in U.S. and international enforcement of legal prohibitions on informed trading,” they added.

According to the researchers, the findings show that the short sales were larger than in the days before previous rounds of fighting between Israel and terrorists in Gaza, as well as before the outbreak of COVID-19.

They also referred to similar patterns in April when it was reported that Hamas initially planned the attack on Israel.

“Short volume in EIS [the MSCI Israel ETF] peaked on April 3 at levels very similar to those observed on Oct. 2 and was far higher by an order of magnitude than other days prior to April 3,” they said.

MarketWatch: Israeli authorities investigate after research suggests short-sellers targeted stocks ahead of Oct. 7 Hamas attack: report

By
William Watts
Published: 

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, Reuters 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 Reuters.

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.

Citing an Oct. 2 spike in short interest in the iShares MSCI Israel Exchange Traded Fund EIS, 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.

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