Latest news with #AnanthaNarayanG
New Indian Express
5 days ago
- Business
- New Indian Express
Jane Street says Sebi charges extremely inflammatory, to challenge ban
MUMBAI: Stating that it has 'only engaged in basic arbitrage,' the now-banned US high-frequency trading giant Jane Street has told is preparing its official response to the Sebi charges and the resultant bank and that 'arbitrage trades are a core and common mechanism of financial markets.' International news agency Reuters, quoting the crippled company's internal communication to its employees, said on Tuesday that it will contest the ban imposed by the Sebi accusing it of market manipulation, claiming that its practices in question are "basic index arbitrage trading". Jane Street has also told their staff that it is "beyond disappointed" by what it calls "extremely inflammatory" accusations by the Securities and Exchange Board (Sebi) and is working on a formal response, Reuters reported without offering details as what could be the counter measures. The Sebi Act allows a market participant to challenge any adverse action taken against it by the Sebi, first in the Securities Appellate Tribunal and if not satisfied with the tribunal verdict can go to the high court and even to the Supreme Court. SEBI last Friday debarred the firm from the market and seized $567 million of its funds which the regulator feels that it gained from its pump and dump strategy during just 21 days of trading during which it had pocketed a whopping Rs 36,503 crore in net profit. Sebi in its interim order issued by its whole time member Anantha Narayan G, alleged that Jane Street bought large quantities of the 12 constituents of the Bank Nifty index first in the cash and futures markets to artificially support the index in morning trade, while simultaneously building large short positions in index options which were exercised or allowed to expire later in the day, pocketing huge profits in violation of its fair trade rules. The regulator, which tracked Jane Street's trading patterns for more than two years beginning January 2023 and ending May 2025, has also widened its investigation to include other indexes and exchanges, a source had said. Over the past three years, the derivatives market, which is the world leader in this segment, has had explosive growth as retail investors swarmed in, despite them booking heavy losses. A study released by Sebi this Monday showed that each retail trader in the derivatives space took a loss of Rs 1.1 crore in FY25, with their net loss increasing by 41% to Rs 1,05,603 study also found that as much as 91% of individual traders saw losses in equity derivatives segment in FY25, marginally down from its previous study which had showed that 93% had booked losses in accounted for roughly 60% of global equity derivative trading volume in May, according to the Futures Industry Association.
New Indian Express
05-07-2025
- Business
- New Indian Express
Jane Street Scam Explainer: Why Sebi banned Wall Street giant Jane Street?
Here's a simple breakdown of the what, why, and how of the Jane Street saga. The case finally reached the regulator SEBI on July 3, resulting in a ban on the Wall Street proprietary trading giant. Jane Street, which operates in over a dozen markets worldwide, had been exploiting India's largest derivatives exchange, the NSE, for years. By manipulating the prices of the 12-stock Bank Nifty index, the firm earned over one-fifth of its $20.5 billion net income from this single market. Their strategy involved artificially inflating prices to lure unsuspecting retail investors into buying those stocks or their derivatives. Once prices hit their targets, Jane Street would offload its positions, leaving retail investors with the losses. According to Sebi's initial assessment, JS Group entities have pocketed a whopping Rs 36,502 crore by this pumping and dumping strategy between January 1, 2023 and March 31, 2025 just from manipulating primarily three (HDFC Bank, ICICI Bank and Kotak Bank which constitute as much as 65% of the sectoral index weighting) of the 12 Bank Nifty stocks -– all in just 21 trading days and Rs 735 crore in just one day on January 17, 2024!!! Unearthing their nakedly illegal practice, the Sebi in an interim order, issued by its whole time member Anantha Narayan G, banned the from the market as well as ordered impounding of Rs 4,843.5 crore of illicit gains they made, which it hopes to recover from their Rs 15,000 crore of Gsecs holding as from July one, the regulator has restricted a traders carry forward derivatives positions to just about Rs 1,500 crore. While the order is interim, the bank on them is in force from the date of the order and will continue till the final order is issued or courts lift/stay the order or until the company returns the alleged unlawful gains of Rs 4,843 crore. What is Jane Street and How Big is It? Founded in 2000 by a team of traders and technologists in New York, Jane Street is a global proprietary trading giant with over 2,600 employees across its five offices across the US, Europe, and Asia and trades in 45 countries. It deploys very complex algorithms all developed in-house to execute high frequency algo trades. I entered the domestic market only in 2020 and has three subsidiaries in the country-- JSI Investments, JSI2 Investments, Jane Street Singapore, and Jane Street Asia Trading—along with Nuvama Wealth Management as their local partner for cash trades, given that foreign traders cannot directly trade in the cash segment. In 2024, it made a whopping $20.5 billion in net income, a fifth of which was made from pumping and dumping Bank Nifty. This is the combined profit of much bigger Wall Street players like Citi and Bank of America have made together in the year. However, the entire gamut of their gaming will be out only when Sebi completes the probe into other indices and exchanges, which Sebi sources say will take at least six months. On just 21 days of trade between January 1, 2023 and March 31, 2025, it made a whopping Rs 36,502 crore from the country just gaming the Bank Nifty. But Sebi says all of this is not illegal. The Sebi breakdown is: Rs 43,289 crore in index options; Rs 900 crore in stock options, and losses of Rs 7,208 crore in stock futures (which Sebi says is purposefully sold in losses) and Rs 288 crore loss in cash segment which again was as planned. Of this it made a whopping Rs 735 crore from Bank Nifty on January 17, 2024 alone—which in fact was the beginning of their undoing as well. Because Sebi began to monitor them more closely from that day onwards. When Did Jane Street Come Under Sebi Radar? Last year, the JS Group sued its Wall Street rival Millennium Management and its ex-employees Douglass Schadewald and Daniel Spottiswood in a New York court. They were accused of allegedly stealing confidential trading strategy and sharing it with their employer Millennium. Its lawyers claimed that the now stolen strategy was JS' most profitable one having helped it earn $1 billion in net income from one market in 2023 which the lawyers of Millennium and Schadewald and Spottiswood inadvertently identified as India during the court arguments. JS also admitted that since it lost the tech clout due to stealing by these two men, its profit from this tool alone fell by 50% in March 2024 as Millennium also started benefitting from this. In fact it is this $1 billion figure which JS did not dispute in the court is what alerted Sebi to closely watch its dealings in the country Sebi's probe into JS also was part of its effort to mitigate the steep losses that retail traders were making in the derivatives space. Its own study has found as much a 93% of retail lost money Given that the NSE is the world's largest derivatives exchange, controlling as much as 60% of global equity derivative trading volume of 7.3 billion trades in April-- down from over 75% of global trade before Sebi clamped down a lot from November 20, 2024. And the retail investors are the most vulnerable to high-risk derivative trading, with 93% of them making losses according to Sebi's own study released last September which quantified the per trader loss at a whopping Rs 1.25 lakh in FY24. "The findings of an earlier research report by Sebi, which inter alia states that 93% of retail investors made losses when trading in the options market, now gain additional context. Such losses, when juxtaposed with the abnormally high profits made by the JS Group entities as a result of the prima facie manipulation of the cash, futures and options markets, are reflective of the deep damage that the group has inflicted through their illegal activities," Narayan said in his order. Following this US case revelations, Sebi in April 2024 began analyzing the proprietary trades by JS. There were also media reports that unauthorised algo trading was rampant in the system. Then on January 17, 2025, Sebi found highly volatility in Bank Nifty (after HDFC Bank result on Jan 16) when the index plunged by 2200 points in the first 7 minutes of the trade from 47000. After this, Sebi asked NSE to warn them first which the exchange asked them to cease and desist from their pumping and dumping strategy on February 6 2025. And JS assured the exchange and Sebi that they would behave but again they resumed the game in May on all weekly expiries. 'This was the last nail on the Sebi' patience,' a source told TNIE Saturday. Why the Sebi Ban? In its 105-page order along with 500-odd pages in the annexures, Sebi, in detail has flagged the 'manipulative' and 'fraudulent' trades by Jane Street that mostly took place on the expiry day of the Nifty Bank index weekly options contracts and in its underlying constituents in the cash market. Sebi alleges—as it can be challenged in the SAT, High Court and finally in the Supreme Court--that Jane Street has been manipulating the Bank Nifty index by making aggressive trades in the morning to push up the index, only to reverse those trades later while holding option positions that profited from these moves. Over a the two-year period, beginning January 1, 2023 and March 31, 2025 and then on all the weekly expiry days of the Nifty in May 2025, they are said to have made Rs 43,289 crore in gains from options—a significant chunk of which Sebi believes came through unfair means as it controlled almost a quarter of the entire volume. Main Trigger--Jan 17, 2024 Profit of Rs 735 crore The first main trigger for the Sebi to keep them under closer watch was the whopping Rs 735 crore profit they made on from Bank Nifty on a single day on January 17, 2024—which in fact was the beginning of their undoing as well. Because Sebi began to monitor them more closely from that day onwards. This profit minting between January 2023 and March 2025 had them pocketing as much as Rs 36,506 crore.
New Indian Express
04-07-2025
- Business
- New Indian Express
Sebi bans Jane Street, impounds $566.3 million for manipulating Nifty index on expiry days
MUMBAI: The capital markets watchdog Securities Exchange Board (Sebi) has debarred the US proprietary trading firm Jane Street Capital from accessing the securities markets, and has impounded as much as $566 million for its illegal gain from manipulating the Nifty index. According to Sebi calculation, the company and its associated entities made a whopping Rs 36,671 crore in profits between January 2023 and May 2025, Sebi said in the 105-page interim order passed by the whole-time member Anantha Narayna G late last night. Of the total gain, Sebi considers as much as $566.3 million are illegal. The group's total illegal profits identified across 15 days in May 2025 was Rs 4,843 crore. Between January 2023 and March 2025, JS made Rs 44,358 crore in options, lost just Rs 7,208 crore in stock futures, lost Rs 191 crore in index futures and Rs 288 crore in cash. Overall its net profit stood at Rs 36,671 crore. What JS Group used to do was on the expiry days, it aggressively bought large amounts in BankNifty underlying stocks/futures (to the tune of Rs 4,370 crore on Jan 17, 2024 and sold this index options Rs 32,115 crore. By afternoon it aggressively sold large underlying stocks/futures worth Rs 5,372 crore. Peak short position in the index options segment was Rs 46,620 crores. Thus it made a clean profit of Rs 735 crore from index options, while its intraday loss from cash/futures was only Rs 61.6 crore. In a 105-page order issued late Thursday night and issued by whole-time member Anantha Narayan G, stated that the US trading firm's 'four entities are restrained from accessing the securities market and are further prohibited from buying, selling or otherwise dealing in securities, directly or indirectly.' The regulator also issued an interim order to impound over $566.3 million from Jane Street in alleged illegal gains and banks have been directed to ensure that 'no debits are made from accounts held by Jane Street's entities either jointly or individually, without permission of Sebi.' The four entities debarred are JS India (JS) Investments, JSI2 Investments, Jane Street Singapore, and Jane Street Asia Trading. The US trading firm allegedly used various strategies to artificially influence the benchmark Nifty 50 index to profit from significantly larger positions in index options, Sebi said in the interim order. The regulator further said repeated instances of manipulative trading continued even after an 'explicit advisory' was issued to the firm in February 2025. The Sebi had previously expressed concerns over practices such as algorithmic trading, which it said in a September 2024 report allowed proprietary traders and foreign portfolio investors to make Rs 61,000 crore in profits in FY24, while retail investors and other market participants lost heavily to the tune of Rs 1.25 lakh each the same amount during that period. Sebi said movements in underlying cash markets impacts index benchmarks, while movements in the indices impacts prices of futures and options as markets segments such as cash equities, futures, options, are interrelated. The problem gets confounded as there is much more trading volumes in the index options market than there is in the underlying stock and futures market. For example, on January 17, 2024 Bank Nifty expiry day, cash market turnover in the 12 stock constituents were Rs 29,225 crore, while futures market turnover in them were Rs 43,589 crore and the futures turnover was Rs 32,607 crore while the futures equivalent/delta equivalent turnover was a whopping Rs 1,03,17,127 crore. This means that the relative size of BankNifty options market to cash market is 353 times and the relative size of Bank Nifty options market to the total of cash and futures market and the Bank Nifty index futures turnover was 98 times on that particular day. Also, this shows that there are many more individuals and entities trading in index options market than there are in the underlying stock and futures market. For example, on January 17, 2024 the number of unique entities that traded in the cash market of all of the top three Bank Nifty constituent stocks was 752 while the number of unique entities that traded in its futures contracts was 26,593 and the number of unique entities that traded in its options contracts was a much higher 16,15,011.
