Jane Street slams Sebi allegations, plans to contest ban and impounding order

Indian Express

21 hours ago

New York-based global proprietary trading firm Jane Street has strongly criticised India's market regulator Sebi over its recent enforcement action, calling the accusations 'extremely inflammatory' and stating it is 'beyond disappointed' by the order.
The firm, which is among the largest players on Wall Street, said in a mail to its employees that it is preparing a formal response to the Securities and Exchange Board of India's (Sebi) decision, which includes a ban on the firm's market participation and an order to impound Rs 4,843 crore in what the regulator described as 'unlawful gains'.
Jane Street rejected the market watchdog's charge that it was involved in 'an intentional, well planned, and sinister scheme' to manipulate Indian markets through its derivatives trades, especially in Nifty Index futures. The firm asserted it would contest the order through appropriate legal channels.
In a memo sent to its roughly 3,000 employees on Sunday and reported by the Financial Times newspaper, Jane Street said, 'it's deeply upsetting to see the firm mischaracterised this way.'
'We take pride in the role we serve in markets around the world, and it's painful to have our firm's reputation tarnished by a report based on so many erroneous or unsupported assertions,' the memo said.
Jane Street is yet to respond to a mail about the Sebi allegations sent by The Indian Express.
Last week, the market regulator granted Jane Street 21 days to file an objection to its order and request a hearing. Jane Street, one of the most prominent and successful proprietary trading firms to emerge in the past two decades, has grown into a major force across global financial markets.
In its internal memo, Jane Street criticised Sebi for relying on 'a metric for market impact and trading aggressiveness which seems disconnected from actual market dynamics.' The firm argued that its trading activity on January 17, 2024 — one of the days singled out in Sebi's report — reflected routine 'basic arbitrage trading,' a widely accepted strategy in the industry.
Jane Street has sharply contested Sebi's claim that it disregarded concerns raised by the National Stock Exchange (NSE), an allegation the regulator used to justify its sudden and unprecedented ban on the firm's trading operations in India. In the internal memo, Jane Street described the charge as 'especially far from reality,' stating that it had promptly halted its trading activity at the time to better understand the exchange's concerns. The firm added that it subsequently adjusted its strategies to align with the NSE's stated preferences.
'Once again, we left this process feeling that we had reached an understanding of the concerns and reflected them in modifications to our trading behaviour,' the memo said. 'Since February, we have made ongoing efforts to communicate with Sebi and have been consistently rebuffed.'
According to the FT report, the US firm nearly doubled its net trading revenues to $20.5 billion last year, outpacing several of Wall Street's biggest banks. In the first quarter of 2025, Jane Street notched up net trading revenues of $7.2 billion, more than Morgan Stanley.
'Sebi's investigation was triggered by revelations from a lawsuit launched by Jane Street last year against Millennium Management and two former traders that had moved to the hedge fund. Jane Street's complaint alleged that the traders had stolen a hugely valuable trading strategy, which was later revealed to revolve around Indian options trading,' FT report said.
According to the regulator's findings, Jane Street's trades, particularly in Nifty index futures, showed a clear pattern. The firm wasn't trading passively or reacting to the market — it was nudging prices upward, consistently placing orders at or above the last traded price (LTP). This pattern intensified in the final hours of trading, a critical window that often shapes the day's closing price. Sebi described it as a 'non-neutral trading behaviour', a strategic attempt to influence prices rather than simply engage with the market. And the tactic wasn't random; it followed a well-known play in the trading world: 'marking the close.'
Jane Street, regulators say, was executing what's known as an extended 'marking the close' strategy — placing large and aggressive buy or sell orders near the end of the trading session, with the intention of artificially moving the closing price of a stock or index. The closing price is critical, especially on derivatives expiry days, as it determines the settlement value for futures and options contracts.