In a dramatic move that’s rattled India’s financial markets, the Securities and Exchange Board of India (SEBI) has banned the global trading giant Jane Street Group from participating in the country’s securities markets.
The regulator accused the firm of orchestrating what it calls one of the boldest market manipulation schemes in Indian history.
The alleged strategy
Jane Street, a US-based quant trading powerhouse known for its prowess in high-frequency strategies, allegedly leveraged the quirks of India’s red-hot derivatives market, especially around expiry days.
According to SEBI’s investigation, the firm zeroed in on the Nifty Bank Index, which tracks India’s top banking stocks.
On weekly and monthly expiry days when billions of rupees in derivatives come up for settlement, Jane Street reportedly played the market like a chessboard.
In the morning, the firm would buy large quantities of Nifty Bank stocks and futures, giving the index an artificial boost.
While the market reacted to this upward momentum, Jane Street was quietly building massive bearish positions in the options segment, snapping up puts and selling calls.
In the afternoon, just as contracts neared settlement, they would offload their earlier stock and futures buys, dragging the index downward and locking in outsized gains from their options trades.
This manipulation resulted in a misleading spike-and-crash in the index that fooled traders into thinking real buying and selling was driving the market.
Meanwhile, Jane Street raked in massive profits from options that benefited from the sudden reversal.
High-frequency sleight of hand
But it didn’t stop there. SEBI says Jane Street used “mirror trading,” placing matching buy and sell orders between its own entities to create the illusion of active trading.
These were often reversed within seconds, generating volume without any actual market risk.
There was also evidence of circular trading, where trades bounced back and forth between group entities to inflate volume and influence prices, especially in the final minutes before expiry.
In essence, these tactics didn’t provide liquidity or hedge risk. SEBI says they were purely about influencing settlement prices and cashing in on manipulated options positions.
Jane Street made over Rs 43,000 crore in options profits but incurred over Rs 7,200 crore in losses in cash and futures, for a net gain of about Rs 36,500 crore over 21 expiry days examined by SEBI.
SEBI comes down hard
This time, SEBI didn’t hold back. The regulator came down hard on Jane Street, barring the firm and all its affiliates from participating in any trading activity whether directly or through intermediaries.
It also froze Rs 4,843 crore in alleged illicit gains, which have now been moved into an escrow account while the investigation continues.
The crackdown marks one of SEBI’s most aggressive enforcement actions to date against a foreign trading firm, sending a strong message about the consequences of market manipulation.
Jane Street denies the allegations. The firm claims its strategies comply with the rules and says it’s committed to cooperating with Indian regulators.
It also insists its actions weren’t manipulative but part of normal market-making activity.
Wake-Up call for India’s markets
The fallout is already visible.
Nifty Bank weekly options once among the most popular contracts have been discontinued, and SEBI has moved to tighten rules to protect retail investors and crack down on algorithmic abuses.
This case could become a landmark, not just for SEBI but for global financial regulation, an example of how clever can turn into criminal when market signals are gamed at scale.
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