TASE exec pushes back against claims Hamas used short selling ahead of Oct. 7 massacre

Concerns have been raised regarding a research paper that suggested Hamas or an affiliated organization might have profited from short selling ahead of the Oct. 7 massacre in Israel.

In an article published in Globes, Yaniv Pagot, Tel Aviv Stock Exchange EVP head of trade, called into question many assumptions made in the research paper “Trading on Terror?” published in the Social Science Research Network journal by law professors Robert J. Jackson, Jr. of NYU and Joshua Mitts of Columbia. Pagot argued that analysis exhibited a “lack of understanding” about operations of the TASE, including the denominations used to quote stock prices.

In the paper, Jackson and Mitts presented evidence that “traders informed about the coming attacks profited from these tragic events,” citing “a significant spike in short selling” in several instruments, including the iShares MSCI Israel ETF (NYSEARCA:EIS) as well as individual stocks, like Bank Leumi.

“What the researchers did in the study was to assume through lack of familiarity with the local market that share prices in Israel are quoted in shekels rather than agorot,” Globes quotes Pagot as saying, noting that 100 agorot equals a shekel. The executive added that this error “magnified the loss per share 100 times.”

Pagot went on to note that transparency regulations related to short selling, as well as other regulations, such as those dealing with money laundering, would make it difficult for an actor like Hamas to short stocks in the way outlined in the paper.

“Would somebody from Hamas or a straw company acting on their behalf sign a share lending agreement on the TASE?” Globes quotes Pagot as saying. ” In other words, there could not be such a scenario.”

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