Israel exchange says no abnormal trading ahead of Oct. 7 assault, calls short seller report 'flawed'


An digital ticker shows inventory value info on a totem signal exterior the Tel Aviv Stock Exchange in Tel Aviv, Israel, on Tuesday, Nov. 7, 2023.

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The head of trading on the Tel Aviv Stock Exchange criticized “flawed evaluation” in a latest analysis report that documented short promoting ahead of the Oct. 7 terror assault in southern Israel.

The analysis, titled “Trading on Terror?” and printed on the Social Science Research Network by two regulation professors, contains claims that there was a “vital spike in short promoting” within the MSCI Israel exchange-traded fund, a basket of Israeli shares, on Oct. 2, citing Financial Industry Regulatory Authority information.

The authors initially cited value actions utilizing shekels, when the info was referring to agorot, value one-hundredth of a shekel. The report has been reissued with a correction on the Israeli foreign money models. The authors of the analysis say it raises wider points that should be investigated by regulators.

Yaniv Pagot, head of trading on the Tel Aviv Stock Exchange, stated the foreign money subject resulted in “fairly a couple of errors,” together with the declare that income from short promoting within the Israeli financial institution Leumi totaled 3.2 billion shekels ($865 million), fairly than 32 million shekels. Short promoting includes betting that an asset value will fall and the analysis report recommended some traders had been betting in opposition to the Israeli economic system and made giant returns.

“”This is a flawed evaluation from the outset and there’s a lack of understanding of how the native market operates,” Pagot stated in an announcement supplied to CNBC.

Pagot was commenting solely on the portion of the report associated to the Tel Aviv Stock Exchange. He additional informed Reuters in an interview, “There was nothing uncommon in short positions within the inventory exchange within the two months earlier than the assault.”

CNBC has not independently reviewed the FINRA information or the trading patterns referenced within the report. A separate assertion by the Israel Securities Authority stated that “examinations discovered, inter-alia, that the typical short balances for shares traded on the Tel-Aviv Stock Exchange declined throughout the interval previous October seventh,” in line with Reuters.

The report suggests the trades might have been knowledgeable by prior data of the assaults. The authors, Joshua Mitts, a professor at Columbia Law School, and Robert Jackson, a regulation professor at New York University, stated they discovered “troubling trading patterns” that warrant investigation.

“As the [Israel Securities Authority] acknowledges, short sellers trading simply earlier than October 7 earned tens of thousands and thousands of [new Israeli shekel] in income on one [Tel Aviv Stock Exchange] safety alone, and the ISA’s investigation didn’t deal with the short promoting within the Israel ETF or short-dated choices described in our paper. We hope regulators in Israel and all over the world will proceed to look at these troubling trading patterns,” the authors informed CNBC.

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