After Jane Street crackdown, Sebi scrutinising other high-frequency traders
This move signals the regulator's intent to tighten oversight of complex algorithm-driven trading, especially by global players who account for a significant chunk of the volumes in India's derivatives market. The regulator has asked NSE and BSE to analyse trades of these foreign HFT and quant firms, a source said.
'Sebi is looking into the transactions of other large foreign high-frequency trading (HFT) companies and quantitative trading firms to ascertain if they also behaved in a similar manner. It is difficult to say when, whether and what action will be taken,' said the source.
Emails sent to the Sebi, NSE and BSE did not elicit any response.
On July 3, Jane Street group was barred by the Securities and Exchange Board of India (Sebi), for allegedly indulging in trading patterns which raised serious concerns over market integrity, particularly around the expiry of index derivatives.
Some of the big algo trading firms operating in the domestic market include Millennium Management, US-based Citadel Securities, Alphagrep Securities and Tower Research Capital.
Last week, Sebi Chairman Tuhin Kanta Pandey said that the Jane Street case was a surveillance issue and the markets regulator was keeping a track of it.
Market participants, however, believe that the Sebi would tread carefully as it would not like to scare away foreign HFT and quant firms, who play an important role in providing liquidity in the market.
'They will have to act in a balanced manner, as any stern action would mean volumes will dry up. There could be an impact on the liquidity or depth of the Indian market, which may not be good from the point of view of inviting foreign players,' said a trader.
Sebi examined the aggregate profit/loss made by the Jane Street group for the period January 1, 2023 to March 31, 2025. In its investigation, Sebi found that the Bank Nifty index — a major index of the securities market comprising 12 stocks of India's major banks — has prima facie been manipulated in a complex and illegal manner aided by JS Group's immense trading, financial and technological prowess.
JS group deployed two unauthorised proprietary trading strategies — intraday index manipulation and extended marking the close, the regulator said in the interim order. The group allegedly made a profit of Rs 36,502.12 crore during the period of investigation. The regulator has ordered the impounding of Rs 4,843.57 crore of unlawful gains made by the group through manipulative trading.
One of the fallouts of barring Jane Street group from the domestic securities market will be a drop in F&O volumes, market participants said.
'Every event has an immediate impact and so the volume will get impacted,' said a broker.
The space left by Jane Street will be filled up by some other player. Traders said that while it is difficult to say whether the decline in volume will be fully recouped or not, the impact on trading volume will gradually become less.
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