Jane Street probe: SEC seeks Sebi details as investigation continues; Rs 4,843 crore gains under lens
The US Securities and Exchange Commission (SEC) has asked the Securities and Exchange Board of India (Sebi) for details on its ongoing investigation against Jane Street, a New York-based proprietary trading firm accused of manipulating India's derivatives market.
People familiar with the development were quoted by ET as saying that Sebi has already responded to specific queries raised by the SEC.
Under Articles 6 to 8 of the IOSCO multilateral agreement, regulators who are signatories are obliged to share information with one another.
According to ET, Sandeep Parekh, who is managing partner of Finsec Law Advisors, said, 'As both are signatories, the SEC can seek any information required and Sebi would be obliged to give it for regulatory action or investigation'.
He noted this framework had earlier been used by Sebi in its probe into UBS.
On July 3, Sebi issued an interim order barring Jane Street from trading and directed it to deposit Rs 4,843.57 crore, the alleged illegal gains from manipulation. The firm complied, placing the full amount in an escrow account.
Following this, Sebi conditionally lifted the trading ban on July 21. As per news agency ANI, the decision drew appreciation from legal and market experts who saw it as a fair balance between due process and investor protection.
Jane Street, which deploys complex high-frequency algorithms and operates across major global markets, has not legally contested Sebi's findings yet. However, the firm has maintained that it reserves the right to pursue legal and equitable remedies.
According to sources cited by ET, Jane Street has been informed of the hearing dates and its lawyers are preparing a formal rebuttal.
Sebi's order alleged that Jane Street used its 'trading, financial and technological prowess' to manipulate the Bank Nifty Index through aggressive morning buying and late-day selling patterns.
The manipulation allegedly impacted index levels near expiry and harmed retail investors on the opposite side of the trade. The regulator has invoked the PFUTP (Prohibition of Fraudulent and Unfair Trade Practices) regulations and used Jane Street's trading data from about 20 profitable days to quantify illegal gains.
Legal experts argue that Sebi's methodology focused only on a few profitable days, rather than evaluating a full set of trades.
'It picked the winning days out of many days of winning and losing trades,' a securities lawyer said, as per ET.
Sebi's investigation is ongoing and could be expanded to include the NSE Nifty Index and other stocks. It has also asked exchanges to monitor Jane Street's future trades closely. A confirmatory order will be issued after the hearing process concludes.
Corporate lawyer HP Ranina, speaking to ANI, called Sebi's move 'objective and fair,' stating that if the firm is cleared, the deposited money would be refunded.
Market expert Sunil Shah praised Sebi for protecting retail investors, adding, 'I hope they will monitor these things further so that in future, no big institution can take advantage of small investors
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