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Sebi to tighten derivatives surveillance after Jane Street crackdown
Sundar Sethuraman Mumbai
The Securities and Exchange Board of India (Sebi) is set to bolster its surveillance measures for the derivatives market, announced Chairman Tuhin Kanta Pandey at an event on Monday.
Pandey emphasised that Sebi's action against Jane Street was a surveillance matter, and that monitoring efforts will continue at both the exchange and regulatory levels.
When asked whether Sebi is investigating other high-frequency traders (HFTs) similar to Jane Street, Pandey indicated that he does not believe many other companies are involved, though he did not elaborate further.
The Sebi chief stressed that strong enforcement and surveillance are crucial in preventing market manipulation. Referring to the Jane Street investigation, he explained that the action followed extensive analytical work based on a high volume of data.
'Manipulative practices can be executed by various players in different ways. There is no single method to assess these practices,' Pandey noted.
Addressing the possibility of Jane Street challenging the order, Pandey reiterated that Sebi possesses all necessary powers to investigate and act against fraudulent practices.
He cited the Prohibition of Fraudulent and Unfair Trade Practices (PFUTP) regulations, which explicitly prohibit manipulative and fraudulent activity in the market. While acknowledging the right of entities to challenge regulatory actions, he said Sebi had already laid out its interim measures and the order speaks for itself.
In an interim order dated 3 July, Sebi ordered the impounding of Rs 4,844 crore in 'unlawful gains' made by Jane Street, a US-based proprietary trading firm. This marks the highest-ever impounding by the regulator.
The current order is based on just 18 days of Bank Nifty index manipulation and three days of Nifty index manipulation on expiry days. Sources indicate that the market regulator is investigating other expiry days across exchanges to identify potential patterns.
The 105-page Sebi order also notes that Jane Street allegedly established entities in India to bypass Foreign Portfolio Investor (FPI) regulations.
Pandey's remarks were made on the sidelines of an event launching a new feature in the investor apps of Central Depository Services (CDSL) and National Securities Depository (NSDL). The feature allows retail shareholders to access proxy advisor recommendations while voting on company resolutions via the e-voting system.
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