How Jane Street targeted over 40 Nifty, Nifty Bank stocks in expiry-day trades

Economic Times

18 hours ago

Sebi has barred U.S. trading firm Jane Street and affiliates from Indian markets for manipulating index levels on expiry days, booking illegal gains of Rs 4,840 crore through trades in over 40 Nifty and Bank Nifty stocks.
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U.S. trading firm Jane Street Group allegedly manipulated Indian equity indices by targeting over 40 constituent stocks of the Nifty 50 and Bank Nifty, deploying aggressive expiry-day strategies that netted massive gains, according to a Securities and Exchange Board of India (Sebi) order that barred the firm from Indian securities markets on Friday.The market regulator's order, running 105 pages, outlined how the proprietary trading firm executed high-volume trades to distort index levels, misleading other market participants and profiting from large index options positions. The firm and four of its affiliates have been barred from accessing Indian securities markets, and Sebi has ordered the impounding of Rs 4,840 crore in alleged illegal gains.Sebi's probe identified 18 expiry-day sessions, 15 involving Bank Nifty and three involving Nifty 50, during which Jane Street allegedly engaged in 'sharp, large, and aggressive interventions' across cash, futures, and options markets. These trades, SEBI said, influenced index levels and options pricing to the firm's advantage.Among the Bank Nifty stocks involved were HDFC Bank, ICICI Bank, Axis Bank, State Bank of India, Kotak Mahindra Bank, IndusInd Bank, Federal Bank, Bank of Baroda, IDFC First Bank, AU Small Finance Bank, Punjab National Bank, Canara Bank, and Bandhan Bank.The strategy extended to a broader basket of Nifty 50 constituents, particularly on expiry days in May 2025.Sebi listed trades involving Reliance Industries, Infosys, Tata Consultancy Services, HDFC Life, ITC, Larsen & Toubro, and Kotak Mahindra Bank, among others. In all, the firm allegedly executed trades in over 40 index stocks, including names such as Adani Enterprises, Bajaj Finance, Coal India, HCL Technologies, Hindustan Unilever, JSW Steel, Maruti Suzuki, ONGC, Power Grid, Sun Pharma, and Tata Steel.Sebi's order highlighted January 17, 2024, as Jane Street's single most profitable day in Indian markets, a session where the firm allegedly made Rs 735 crore using what the regulator called an 'Intra-day Index Manipulation' strategy.The Bank Nifty index opened significantly lower that morning at 46,573.95 versus the previous close of 48,125.10. Sebi noted that media reports attributed the drop to weak earnings from HDFC Bank the previous evening.The firm allegedly responded with a two-patch strategy. In 'Patch I,' Jane Street aggressively bought Rs 4,370 crore worth of Bank Nifty constituents and futures, pushing prices up and creating the impression of a recovery. SEBI said that 'at a time when participants in index options markets are misled by the above support for Nifty Bank, JS Group builds effectively Rs 32,114.96 crores of bearish positions in the much more liquid Nifty Bank index options by buying cheap Put options and selling expensive Call options.'In 'Patch II,' the firm reversed these purchases. 'The sales are aggressive, in a manner that pushes down prices in the component stocks and hence index. JS Group books losses in intraday cash/ futures market trading,' Sebi noted. However, the losses in equities were vastly outpaced by profits in the options market, as put options surged in value.'Profits in index options more than compensate for the JS Group's losses in intraday cash/futures trading,' the Sebi order said.Sebi found that Jane Street used this intra-day strategy on 15 of the 18 expiry days it reviewed, while the remaining three involved a different 'Extended Marking the Close' approach, also observed in trades in May 2025, even after Sebi had issued a cautionary notice to the firm.'JS Group continued with similar trades, in disregard of the caution letter from the Exchange… and JS Group's own commitments,' SEBI said, adding that the firm was 'aware that Nifty Bank was almost certainly likely to fall again by the end of the day, given their intent to aggressively sell back all of their morning purchases (and more).'Other market participants, meanwhile, 'were unaware of all this, and were hence enticed to deal at a time that the Nifty Bank itself was being artificially and temporarily propped up,' the regulator said.Sebi's order names four Jane Street entities — JSI Investments Pvt Ltd, JSI2 Investments Pvt Ltd, Jane Street Singapore Pte Ltd, and Jane Street Asia Trading Ltd — which are now banned from buying, selling, or dealing in securities, directly or indirectly. Banks have been directed to freeze all debit transactions from the group's accounts.The regulator said Jane Street earned Rs 36,502 crore in total profits between January 2023 and March 2025, of which Rs 43,289 crore came from index options. These were partly offset by Rs 7,687 crore in losses across cash and futures trades.Sebi also drew attention to broader imbalances in India's derivatives markets, where institutional and proprietary traders, often using high-frequency strategies, dominate gains while retail traders absorb equivalent losses.The order said that Jane Street 'was consistently running what appeared to be by far the largest risks in 'cash equivalent' terms in F&O particularly on index option expiry days.' What made the firm's strategy stand out, Sebi said, was 'the intensity and sheer scale of their intervention in the underlying component stock and futures markets.'(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. 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