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Excellence-Nessuah, one of the biggest brokerages in Israel and the No. 1 player in ETFs, is the most prominent factor in the selloff of Delek Real Estate stock on the Tel Aviv Stock Exchange in the last hours of trading on December 31, 2006. The selloff led the stock to dive 10%.

The very next day, shares of Delek Real Estate corrected with a 13% leap.

The sharp fluctuations in several shares as the year 2006 wound down triggered a wave of rumors, that somebody was trying to move the closing index for the day, based on which institutional investors calculate their annual returns.

Others speculated that the sharp swings in share prices were the result of the rising weight of ETFs on the Tel Aviv Stock Exchange. Exchange-traded funds base their investments precisely on an underlying index, and if the index changes, they have to adjust their portfolios.

But that explanation doesn't really work for Delek Real Estate, which was and is on the Tel Aviv Real Estate-15 index, but which doesn't move it much either way.

Roy Regev, who handles the ETF department at Excellence-Nessuah, confirmed that the company had sold "a few hundred thousand shekel worth, up to a million" of Delek Real Estate shares towards the closing that day.

Excellence-Nessuah had an ETF that tracked the Tel Aviv Real Estate-15 index, he explained, and Delek Real Estate is part of that index. Because several big, new real estate companies joined the index, issuers of ETFs had to scale back their holdings in certain shares, because their weight in the index had dropped. It was not a judgment call by the investors, he clarified, merely a technicality.

The weight of other companies, including Africa Israel and Gazit Globe, also dropped in the index, Regev said, and their shares were sold too. But to be sure, the effect was most evident in Delek Real Estate.

Why? That has to do with liquidity.

Its market capitalization is NIS 4 billion, and its weight makes Delek Real Estate third in the Tel Aviv Real Estate-15 index. But the stock is not particularly liquid: the average volume of trade is a mere few million shekels a day, while trading volumes in the other real estate stocks reaches tens of millions, Regev explains. The public float in Delek Real Estate is just 16% and some of that is held by institutional investors, which don't trade in the share, they just hold it.

The result is that any movement in such an illiquid stock can send its share price flying or falling.

The rumors that perhaps the extraordinary swings in Delek Real Estate were part of an end-year wrestling match between institutional investors, doesn't work in Excellence-Nessuah's case. It does not compete with the institutional investors that were hurt from the selloff, such as Migdal.

However, it is true that Excellence-Nessuah is owned by Phoenix, which does compete with Migdal. But Regev firmly denies any relationshp between the selling and Phoenix: "That is nonsense. There are giant Chinese walls between all the subsidiaries of Excellence-Nessuah."

It is worth noting in this context that a single man, Yitzhak Tshuva, owns Delek Real Estate and Phoenix and, therefore, Excellence-Nessuah.

The Israel Securities Authority is meanwhile looking into some instances of sharp fluctuations right at year-end, and may well look into this affair as well. Excellence-Nessuah has been caught before: charges were filed against some of its former workers in respect to odd trades in Partner Communications stock.