Israel investigating whether traders knew about Hamas attack in advance

Israeli authorities are investigating claims that investors may have known in advance of Hamas' plan to attack southern Israel on 7 October.

Research by law professors Robert Jackson Jr from New York University and Joshua Mitts of Columbia University found significant short-selling of shares leading up to the attacks.

"Days before the attack, traders appeared to anticipate the events to come," the researchers wrote, citing short interest in the MSCI Israel Exchange Traded Fund (ETF) that "suddenly, and significantly, spiked" on 2 October 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," they added in a 66-page report, as reported by Reuters. 

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

"Although we see no aggregate increase in shorting of Israeli companies on US 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," the researchers said.

"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 US and international enforcement of legal prohibitions on informed trading."