Sebi bans Jane Street, impounds $566.3 million for manipulating Nifty index on expiry days
According to Sebi calculation, the company and its associated entities made a whopping Rs 36,671 crore in profits between January 2023 and May 2025, Sebi said in the 105-page interim order passed by the whole-time member Anantha Narayna G late last night. Of the total gain, Sebi considers as much as $566.3 million are illegal.
The group's total illegal profits identified across 15 days in May 2025 was Rs 4,843 crore. Between January 2023 and March 2025, JS made Rs 44,358 crore in options, lost just Rs 7,208 crore in stock futures, lost Rs 191 crore in index futures and Rs 288 crore in cash. Overall its net profit stood at Rs 36,671 crore.
What JS Group used to do was on the expiry days, it aggressively bought large amounts in BankNifty underlying stocks/futures (to the tune of Rs 4,370 crore on Jan 17, 2024 and sold this index options Rs 32,115 crore. By afternoon it aggressively sold large underlying stocks/futures worth Rs 5,372 crore. Peak short position in the index options segment was Rs 46,620 crores. Thus it made a clean profit of Rs 735 crore from index options, while its intraday loss from cash/futures was only Rs 61.6 crore.
In a 105-page order issued late Thursday night and issued by whole-time member Anantha Narayan G, stated that the US trading firm's 'four entities are restrained from accessing the securities market and are further prohibited from buying, selling or otherwise dealing in securities, directly or indirectly.'
The regulator also issued an interim order to impound over $566.3 million from Jane Street in alleged illegal gains and banks have been directed to ensure that 'no debits are made from accounts held by Jane Street's entities either jointly or individually, without permission of Sebi.'
The four entities debarred are JS India (JS) Investments, JSI2 Investments, Jane Street Singapore, and Jane Street Asia Trading.
The US trading firm allegedly used various strategies to artificially influence the benchmark Nifty 50 index to profit from significantly larger positions in index options, Sebi said in the interim order.
The regulator further said repeated instances of manipulative trading continued even after an 'explicit advisory' was issued to the firm in February 2025.
The Sebi had previously expressed concerns over practices such as algorithmic trading, which it said in a September 2024 report allowed proprietary traders and foreign portfolio investors to make Rs 61,000 crore in profits in FY24, while retail investors and other market participants lost heavily to the tune of Rs 1.25 lakh each the same amount during that period.
Sebi said movements in underlying cash markets impacts index benchmarks, while movements in the indices impacts prices of futures and options as markets segments such as cash equities, futures, options, are interrelated.
The problem gets confounded as there is much more trading volumes in the index options market than there is in the underlying stock and futures market. For example, on January 17, 2024 Bank Nifty expiry day, cash market turnover in the 12 stock constituents were Rs 29,225 crore, while futures market turnover in them were Rs 43,589 crore and the futures turnover was Rs 32,607 crore while the futures equivalent/delta equivalent turnover was a whopping Rs 1,03,17,127 crore.
This means that the relative size of BankNifty options market to cash market is 353 times and the relative size of Bank Nifty options market to the total of cash and futures market and the Bank Nifty index futures turnover was 98 times on that particular day.
Also, this shows that there are many more individuals and entities trading in index options market than there are in the underlying stock and futures market. For example, on January 17, 2024 the number of unique entities that traded in the cash market of all of the top three Bank Nifty constituent stocks was 752 while the number of unique entities that traded in its futures contracts was 26,593 and the number of unique entities that traded in its options contracts was a much higher 16,15,011.
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