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Jane Street, a prominent US-based high-frequency trading firm, has found itself embroiled in controversy in India. The Securities and Exchange Board of India (SEBI), the country's market regulator, has taken decisive action by barring the firm from accessing the Indian securities market. This stringent measure stems from allegations of manipulative trading practices employed by Jane Street, which SEBI claims led to unlawful profits within the Indian stock market. The core of the issue revolves around Jane Street's aggressive trading activities in the derivatives segment, specifically futures. SEBI alleges that these trades were not merely aimed at generating profits but were deliberately designed to influence the market itself. The regulator views these strategies as a blatant departure from fair play, characterizing them as orchestrated efforts to manipulate prices to the firm's advantage, allowing them to amass substantial gains. As a proprietary trading firm, Jane Street operates by trading with its own capital, rather than managing funds on behalf of clients. This autonomy, according to SEBI, enabled the firm to accumulate a staggering Rs 32,681 crore in profits, which were subsequently repatriated abroad, effectively circumventing the principles of market integrity. The regulator’s findings paint a concerning picture of a sophisticated scheme designed to exploit the Indian market. Initially, Jane Street's involvement in the Indian markets appeared to resemble that of any seasoned global investor, actively participating in both the cash and derivatives segments and executing trades across a wide range of major stocks and indices. However, SEBI's meticulous investigation revealed a more calculated and manipulative approach. The regulator's analysis of Jane Street's trading activity, particularly in NIFTY index futures, uncovered a distinct pattern. The firm's trades were not simply reactive to market movements but were actively shaping them. Jane Street consistently placed orders at or above the last traded price (LTP), effectively pushing prices upward. This pattern became more pronounced during the final hours of trading, a critical period that often determines the day's closing price. SEBI has labeled this behavior as “non-neutral trading,” highlighting a strategic intent to influence prices rather than engage with the market in a fair and transparent manner. The regulator believes that Jane Street's tactics align with a well-known manipulative trading strategy known as “marking the close.” Jane Street is accused of implementing an extended version of this strategy, involving the placement of large and aggressive buy or sell orders near the end of the trading session. The primary objective of this strategy is to artificially inflate or deflate the closing price of a stock or index. The closing price holds significant importance, particularly on derivatives expiry days, as it determines the settlement value for futures and options contracts. By manipulating the closing price, Jane Street allegedly positioned itself to reap substantial profits.
To illustrate Jane Street's manipulative practices, SEBI highlighted a specific example involving the BANKNIFTY index. In the early hours of trading, Jane Street engaged in a buying spree, acquiring significant quantities of BANKNIFTY stocks and futures. This buying activity temporarily boosted the index. Later in the day, in what appeared to be a carefully orchestrated reversal, the firm liquidated its positions, aggressively selling the assets it had previously accumulated. This “push-pull” tactic not only influenced the index's trajectory during the expiry period but also strategically positioned Jane Street to maximize its gains. Further complicating the matter is the involvement of Jane Street's Indian subsidiary, JSI Investments Private Limited. While the subsidiary consistently incurred losses in its cash market trades, its very existence served a strategic purpose. Indian regulations restrict foreign portfolio investors (FPIs) from engaging in certain cash market trades, such as intra-day trading. By channeling some transactions through its local entity, Jane Street effectively circumvented these restrictions without overtly violating the rules. This allowed Jane Street to maintain the appearance of compliance while continuing its manipulative activities in the futures and options market. The Indian entity's losses served as a smokescreen, obscuring the firm's true intentions. In February 2025, the National Stock Exchange (NSE) issued a caution notice to Jane Street, advising the firm to avoid high-risk activity in index options and refrain from any trading behavior that could be interpreted as manipulative. Jane Street assured the NSE of its commitment to complying with applicable regulations. However, according to SEBI, Jane Street continued its manipulative strategies, relocating them to the derivatives segment. SEBI argues that Jane Street's moves in index futures and stock-level trades were meticulously coordinated to support and steer the NIFTY index, particularly near expiry, when even minor price fluctuations can have significant financial consequences. The play was subtle, the gains were substantial, and the intent, according to SEBI, was undeniably manipulative. The SEBI report emphasizes that the majority of trading and position-taking in F&O by the JS Group was conducted by foreign portfolio investors within the group, and that the profits generated from the identified manipulative schemes were also primarily booked by these FPIs. SEBI states that the net profits booked by the FPIs in the JS Group during the examination period amounted to Rs 32,681 crore. The regulator further notes that this profit magnitude significantly surpasses the average assets held by these FPIs in India between January and May 2025, suggesting that these profits were subsequently repatriated.
As a consequence of these findings, SEBI has ordered the impounding of Rs 4,843.57 crore in alleged unlawful gains made by Jane Street through its manipulative trading practices and has barred the firm from accessing the Indian securities market. SEBI's action against Jane Street has ignited a debate about the future of proprietary trading in India. Experts like Dinesh Thakkar, Chairman and Managing Director of Angel One, have weighed in on the matter. Thakkar noted the surge in retail participation in equity derivatives, highlighting its contribution to liquidity and volatility, which in turn creates opportunities for proprietary trading desks that utilize high-frequency and algorithmic strategies. Thakkar believes that India's market opportunity is structural and not dependent on any single firm, suggesting that the departure of one player will simply pave the way for others. He also anticipates that SEBI's clampdown will lead to sharper compliance and more robust governance, ultimately strengthening market integrity and raising the bar for all participants. While headquartered in the US, Jane Street operates across major global markets and is run by decision-makers based outside of India. This raises questions about the oversight and accountability of foreign financial institutions operating in Indian markets and whether existing safeguards are sufficient to prevent sophisticated forms of market manipulation. Some market experts have criticized SEBI for not intervening sooner, suggesting that whispers about Jane Street's unchecked and aggressive trading strategies had been circulating in the market since early 2024. The case underscores the complexities of derivatives trading and the potential for manipulation. Derivatives are financial contracts whose value is derived from an underlying asset, such as a stock or an index. The NSE has become the world's largest derivatives exchange due to the high volume of trades it handles daily. In a well-functioning market, the price of a stock or index future tends to align closely with the price of the underlying asset due to arbitrage. However, SEBI found that Jane Street deliberately distorted this natural balance. Instead of allowing prices to move freely and correcting any gaps through market forces, Jane Street's trades were designed to influence those very gaps. By executing large and aggressive orders, particularly near market close and around expiry days, they appeared to push futures prices in their favor, disrupting the delicate link between futures and the underlying assets. Jane Street Group LLC, a global proprietary trading firm headquartered in New York, was founded in 2000. The firm has grown into a financial powerhouse with over 3,000 employees, operating across five global offices, and trading a wide array of asset classes on over 200 trading venues in 45 countries.
The SEBI case highlights several critical areas requiring attention in financial market regulation. Firstly, it underscores the need for vigilant monitoring of high-frequency trading activities, especially those conducted by proprietary firms. The speed and complexity of these trades make it difficult to detect manipulative patterns in real-time, necessitating advanced surveillance technologies and analytical tools. Secondly, the involvement of Jane Street’s Indian subsidiary, JSI Investments Private Limited, reveals the potential for regulatory arbitrage. Foreign firms may exploit loopholes in local regulations by routing transactions through domestic entities, making it harder to trace and prosecute illicit activities. This calls for greater harmonization of regulations across jurisdictions and closer collaboration between regulatory agencies. Thirdly, the timing of SEBI’s intervention raises questions about the effectiveness of early warning systems. The fact that whispers about Jane Street’s aggressive trading strategies had been circulating in the market since early 2024 suggests that the regulator could have acted sooner. This highlights the importance of proactive monitoring and timely enforcement actions to deter market manipulation. Furthermore, the magnitude of profits repatriated by Jane Street underscores the need for stricter scrutiny of cross-border financial flows. While legitimate foreign investment is essential for economic growth, it is equally important to ensure that profits are not derived from illegal activities and that they are subject to appropriate taxation. The Jane Street case is a wake-up call for regulators worldwide. It demonstrates the sophistication and ingenuity of modern market manipulators and the challenges of policing global financial markets. To maintain market integrity and protect investors, regulators must be vigilant, proactive, and adaptable to the evolving landscape of financial technology and trading strategies. The case also highlights the ethical responsibilities of market participants. While profit maximization is a legitimate business objective, it should not come at the expense of fairness, transparency, and market integrity. Proprietary trading firms, in particular, must be mindful of the potential impact of their activities on market stability and investor confidence. The long-term health and sustainability of financial markets depend on the collective commitment of all stakeholders to uphold the highest ethical standards and regulatory compliance. The Jane Street case serves as a reminder that market manipulation is not a victimless crime. It erodes investor confidence, distorts price signals, and undermines the efficient allocation of capital. By taking decisive action against Jane Street, SEBI has sent a strong message that it is committed to protecting the integrity of the Indian securities market and holding those who violate its rules accountable.
Source: What was Jane Street doing in India, and why did SEBI bar It?