The Indian financial markets are currently grappling with a significant upheaval following the Securities and Exchange Board of India’s (Sebi) decisive action against global trading behemoth Jane Street Group. The market regulator has not only barred Jane Street and four of its affiliated entities from participating in India’s securities market but has also ordered the impounding of ₹4,840 crore in alleged unlawful gains. This unprecedented move, as highlighted by industry veteran Uday Kotak, underscores three critical aspects of the modern market: the growing influence of “money power,” the inherent disparity in liquidity between single stocks and index derivatives, and the volume-centric business models of exchanges and brokerages.
Sebi’s stringent interim order, spanning an exhaustive 105 pages, levies serious accusations against Jane Street, asserting that the firm deployed sophisticated high-volume, cross-segment strategies to manipulate the Nifty and Bank Nifty indices. This alleged manipulation, according to the regulator, served to mislead unsuspecting retail traders while generating colossal profits from index options. Between January 2023 and March 2025, Jane Street is reported to have accrued over ₹36,500 crore in net profits within India, with an astonishing ₹43,289 crore stemming from index options alone. Such figures throw into sharp relief the potential for sophisticated algorithmic strategies to distort market dynamics, creating an uneven playing field for the broader investor community.
A key alleged strategy, termed “Intra-day Index Manipulation,” was reportedly executed by Jane Street on 15 of the 18 expiry days scrutinised by Sebi. This involved the strategic acquisition of large quantities of index constituent stocks during morning trading hours to artificially inflate prices, all while the firm held substantial bearish positions in the derivatives market. These cash market trades were then purportedly reversed later in the day, driving down prices and allowing Jane Street to profit handsomely from the subsequent fall in the derivatives segment. For instance, on January 17, 2024, a day detailed by Sebi, the firm allegedly purchased ₹4,370 crore worth of Bank Nifty stocks in the morning, creating a misleading impression of market strength. Concurrently, it amassed a staggering ₹32,114.96 crore in bearish options positions. By afternoon, the reversal of cash market trades reportedly depressed the index, yielding a monumental ₹734.93 crore in derivatives profits, marking its largest single-day gain in Indian markets.
The regulator’s order unequivocally states that the sales were “aggressive, in a manner that pushes down prices in the component stocks and hence index,” with Jane Street incurring losses in intraday cash/futures markets, which were “more than compensate[d] for” by profits in index options. This intricate web of trading activity, Sebi argues, points to a deliberate pattern designed to exploit market vulnerabilities for disproportionate gains. The concern extends beyond these specific instances, as the regulator had reportedly initiated a review of Jane Street’s trades as early as April 2024, even issuing a cautionary letter in February 2025 via the National Stock Exchange (NSE). Despite these warnings and the firm’s ostensible commitments, Sebi observed a continuation of similar trading patterns, leading to the current decisive enforcement action.
Furthermore, on three other expiry days, Jane Street allegedly employed an “Extended Marking the Close” strategy, involving large sell orders in the waning minutes of trading to depress index levels, thereby benefitting their short-call or long-put positions. Sebi underscored that Jane Street was “consistently running what appeared to be by far the largest risks in ‘cash equivalent’ terms in F&O particularly on index option expiry days,” leaving other market participants “unaware of all this, and were hence enticed to deal at a time that the Nifty Bank itself was being artificially and temporarily propped up.”
While Jane Street has publicly refuted Sebi’s findings, affirming its commitment to global regulatory compliance and its intention to engage further with the regulator, the interim order mandates a freeze on the accounts of four linked entities – JSI Investments Pvt Ltd, JSI2 Investments Pvt Ltd, Jane Street Singapore Pte Ltd, and Jane Street Asia Trading Ltd – effectively prohibiting them from dealing in Indian securities. The firm, which commenced its India operations in December 2020, has a period of 21 days to respond to the Sebi order or file an appeal with the Securities Appellate Tribunal, a crucial avenue for legal recourse in such regulatory matters. This unfolding saga serves as a stark reminder of the imperative for robust regulatory oversight in a rapidly evolving financial landscape, particularly as high-frequency and algorithmic trading strategies continue to reshape market dynamics, demanding vigilance to ensure market integrity and a level playing field for all participants, especially the vulnerable retail investor.
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