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How US trading firm Jane Street manipulated Indian markets to earn hundreds of crores in a single day
The Securities and Exchange Board of India (Sebi) has given Jane Street 21 days to file a response or challenge its order. Reuters
US trading firm Jane Street has been banned from accessing the Indian securities market.
The Securities and Exchange Board of India (Sebi) has accused the New York-based company and its entities – Jane Street Singapore Pte. Ltd., Jane Street Asia Trading Ltd., JSI Investments Private Ltd., and JSI2 Investments Private Ltd – of manipulating the securities market to make a profit of thousands of crores.
'Entities are restrained from accessing the securities market and are further prohibited from buying, selling or otherwise dealing in securities, directly or indirectly,' Sebi said in its interim order.
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Sebi has said it is confiscating illegal gains to the tune of Rs 4,843 crore. It has ordered the company to deposit that money into an escrow account with a commercial bank.
Sebi said the ban on Jane Street and its entities will remain in place until the investigation is complete and it passes the final order.
Jane Street has said it disagrees with Sebi's decision and that it will be in touch with the market regulator.
'Jane Street is committed to operating in compliance with all regulations in the regions we operate around the world', the firm said.
But what happened exactly? How did Jane Street allegedly manipulate markets to the tune of hundreds of crores in a single day?
Let's take a closer look:
A brief look at Jane Street
Let's take a brief look at Jane Street.
The company, founded in 2000, is one of the world's largest quantitative trading firms.
Quantitative trading firms rely on maths and algorithms to buy and sell shares and securities.
This has the benefit of taking humans and their emotions out of the equation – quite literally.
Many firms and hedge funds engage in high-frequency quantitative trading. This is when hundreds of thousands of shares are bought and sold in the blink of an eye.
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Quantitative trading firms rely on maths and algorithms to buy and sell shares and securities.
Jane Street has been in the news recently for being exceedingly successful. The firm in 2024 reportedly generated net trading revenue worth $20.5 billion.
This is more than what major behemoths such as Citigroup and Bank of America generated.
The firm is now a major force on Wall Street. The company has gone global with offices around the world including in London, Hong Kong, Singapore and Amsterdam.
Jane Street is said to have raked in billions from trades in the Indian markets alone.
What happened?
The reports in major media outlets about Jane Street's incredible performance in Indian markets came to the attention of Sebi.
The Indian market regulator in April 2024 opened a preliminary investigation into Jane Street's trades in India between January 2023 and March 2025.
Sebi in July 2024 directed the NSE to look into Jane Street's trades.
'Sebi observed what appeared to be abnormally high or low volatility on weekly index options expiry days. Further, Sebi noted that there were certain entities consistently running what appeared to be by far the largest risks in 'cash equivalent' terms in F&O (futures and options), particularly on expiry days,' the NSE report stated.
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The market regulator in its 105-page order claimed that Jane Street and its Indian entities manipulated the Bank Nifty index by taking massive positions in derivatives.
The investigation, which examined Jane Street's trading patterns, found that the firm employed two major strategies to manipulate the indexes.
It said the firm and its entities would purchase massive amounts in the Bank Nifty index in morning trade. This would usually be done in the cash and futures markets and thus artificially boost the index.
In the meantime, the firm and its entities would also take huge short positions in index options. Then, later in the day, the company would reverse its options positions completely.
For example, on January 17, 2024, Jane Street suffered a loss of Rs 61.6 crore in the cash and futures. However, it also booked a profit of Rs 734.93 crore in Bank Nifty index options.
It executed a similar strategy on July 10, 2024.
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Sebi said it found 'highly concentrated activity' particularly in the last hour before the market closed.
It said that Jane Street did this on well over a dozen occasions – 15 times with the Bank Nifty and three times with the Nifty.
'By moving the BANKNIFTY index with large and aggressive buying followed then by large and aggressive selling, JS Group was creating a false or misleading appearance of market activity. In the bargain, it was enticing unsuspecting entities trading in BANKNIFTY index options to trade at interim levels that were artificial and temporary," Sebi said in its order.
Sebi said that, under its rules, this is tantamount to manipulating the index market.
Sebi said it found 'highly concentrated activity' particularly in the last hour before the market closed. Reuters
It said such Jane Street and its entities engaged in 'egregious manipulation of the prices of securities and benchmark indices for their own illegal gains, to the detriment of several lakhs of small market participants'.
In the two-year time period that the Sebi investigated, Jane Street was found to have made a profit of Rs 44,358 crore in options, lost Rs 7,208 crore in stock futures, Rs 191 crores in index futures and Rs 288 crore in cash.
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Nevertheless, Jane Street made an overall profit of Rs 36,671 crore.
Sebi has impounded the profits made in all the 18 days it found between the two-year period.
It is this money, which amounts to Rs 4,843 crore, which the Sebi has confiscated as 'illegal gains'.
Sebi has given Jane Street 21 days to file any reply or objections to its order.
The company can also challenge the Sebi order judicially via the Securities Appellate Tribunal.
India derivatives market
India is the world's largest derivatives market.
It comprised nearly 60 per cent of global equity derivative trading volumes of 7.3 billion in April, according to the Futures Industry Association.
However, derivatives are not for the faint of heart.
Sebi last year released a study showing that though foreign firms made money trading in index derivatives, retail investors did not.
In fact, individual investors have lost Rs 1.8 lakh crore in index trading over the past two years.
A source in the know of Sebi's thinking said the decision to bar Jane Street was announced on a Thursday evening after the week's derivative cycle expired.
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This would thus minimise any wider impact on the markets.
Also, starting July 1, the regulator has tightened rules for positions being taken in derivatives which would help limit the impact if any, the source added.
Market liquidity is unlikely to be impacted, the source said, declining to be identified as they are not authorised to speak to the media.
With inputs from agencies
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