A recent study by US researchers Robert J. Jackson Jr. and Joshua Mitts from New York University and Columbia University has uncovered evidence of suspicious trading activity in the Israeli stock market in the days leading up to a terrorist attack by Hamas. The research suggests that certain traders may have had inside information about the impending attacks and used this knowledge to profit from short selling on the ETF MSCI Israel, which tracks Israeli stocks listed on the Tel Aviv Stock Exchange (TASE).
The study found that short sellers, who speculate on falling prices, were particularly active in trading the ETF MSCI Israel in the five days leading up to the attack. The volume of short sales on October 2nd exceeded that seen during other times of crisis, such as the financial crisis in 2008 or the Covid pandemic in 2020. Some of the Israeli companies listed on the TASE, including Checkpoint, Nice, Teva, and Bank Leumi, were among those targeted by short sellers.
Although the researchers did not directly link inside information used by speculators to Hamas, Israeli media reports suggest that terrorists may have been involved in these transactions. If this is true, it could have serious implications for criminal authorities and regulators worldwide. Suspicious trading activity had also been detected prior to a previous incident in April, indicating a pattern of behavior among certain market participants.
Short sellers take advantage of non-public information to profit from falling prices by borrowing shares, selling them, and buying them back at a lower price later on. In this case, parties involved in short sales targeted not only Bank Leumi shares but also dozens of other Israeli shares in the main indices TA-35 and TA-90. This suggests a coordinated effort among some market participants to take advantage of inside information for profit before a major event occurred.
Overall, these findings raise ethical and legal questions about profiting from inside information and highlight potential risks associated with financial markets during times of crisis or political instability. As investigations continue into these events and their aftermath, it will be important for regulators to ensure that markets remain transparent and accountable while protecting investors from unfair practices or manipulation.
