Japan is probing a sevenfold surge in trading of Nikkei-225 stock index futures a day before last week's terrorist attacks in the US, to see if anyone with prior knowledge profited from the assaults.
Japan's Securities and Exchange Surveillance Commission is probing futures trade in Tokyo and Osaka, SESC officials said, confirming an earlier Jiji news report. On the Osaka Securities Exchange, 8,826 Nikkei-225 December futures contracts changed hands on Sept. 10, compared with a daily average of 1,151 contracts in the previous week, according to Bloomberg Data.
The probes in Asia, where most markets stayed open after the attacks, mirror a US Securities and Exchange Commission investigation into unusual trading in companies such as UAL Corp and AMR Corp in the days before terrorists crashed hijacked United Airlines and American Airlines jets into the World Trade Center and the Pentagon.
"We're increasingly exchanging information with the US government," said Daisuke Matsunaga, a spokesman for Japan's Ministry of Foreign Affairs. "We share the United States' anger about these terrorist attacks and the Japanese government will cooperate with the US in whatever way we can."
The day before two AA jets were hijacked and crashed, 1,535 contracts changed hands on options that allow investors to profit if AMR stock falls below US$30 per share before Oct. 20. That was almost five times the total number of October US$30 put options traded before Sept. 10, according to Bloomberg data. AMR shares fell US$11.70, or 40 percent, Monday to US$18.
In the US, Morgan Stanley Dean Witter & Co, which occupied 22 floors of 2 World Trade Center, and Merrill Lynch & Co, with headquarters near the destroyed towers, experienced pre-attack trade of 12 times to more than 25 times the usual volume in so-called put options that allow investors to profit when stock prices fall, according to Bloomberg data.
The Nikkei 225 Stock Average plunged 6.6 percent after the terrorist attacks and by Sept. 13, trading in Nikkei 225 December futures had swollen to 27,873 contracts. Hong Kong's Hang Seng Index fell 8.9 percent a day after the attacks and if associates of the terrorists had bet the markets would fall, they could have made money from the declines.
Hong Kong Exchanges & Clearing Ltd spokeswoman Lorraine Chan and Securities and Futures Commission spokesman Ernest Lau said the exchange and its regulator are checking for unusual trading activities.
The US named elusive Saudi millionaire Osama bin Laden as prime suspect in the attacks and said it plans to break his alleged terrorist network with both military means and by ending access to his wealth. The heir to a construction fortune has used intermediaries to deny involvement in the attacks.
"There is no evidence of the reported involvement of Hong Kong in any money-harboring activity related to Osama bin Laden," said Jasmin Fung, spokeswoman for the Hong Kong Monetary Authority, which told lenders to examine any suspicious accounts.
"However banks in Hong Kong need to be aware of the issue." Still, even if unusual movements are noted, it'll be hard to prove links with terrorists.
"Drawing any causality would be a long shot," said Alan Thompson, senior vice president at risk consultant Stern Stewart Pte Ltd in Singapore. "Proving anything would be difficult, taking positions is what hedge funds do."
Japan's stock market had also been falling before the attack and is down 39 percent in the past 12 months and remains less than a third of its record high in 1989. And not every market is on the lookout for connections to bin Laden.
"There have been no investigations of possible irregularities in the local stock markets that may be connected to terrorist activities," said Kim Cheol In, an official at the Korean Stock Exchange, to which the government referred inquiries.
"I don't think they [terrorists] would even consider the [South] Korean market considering its size compared to others."
The Australian Prudential Regulatory Authority, which regulates banks and insurers, said it's not asking lenders about suspicious accounts.
"We assume that if the US government had any reason to believe there were accounts here they would ask us to do it and we would certainly cooperate," said Gloria Peterson, APRA spokeswoman.
"We have not been asked to investigate," Australian Stock Exchange spokesman Gervase Greene said. "Trading levels in the days leading up to the tragedy didn't suggest anything unusual."
He said the exchange would help if asked by law enforcement agencies.
Bin Laden is also accused of helping arrange or finance numerous terrorist attacks, including the 1993 truck bombing of the World Trade Center that killed six, the 1998 attack on US embassies in Tanzania and Kenya that claimed more than 200 lives, and last October's attack on the USS Cole in Yemen, an attack that took 17 lives.
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