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Time of India
4 days ago
- Business
- Time of India
Jane St impact: Are mysterious price moves in Nifty 50 options sign of market manipulation?
Tired of too many ads? Remove Ads Tired of too many ads? Remove Ads As India's securities regulator ramps up scrutiny of the options market, some investors are pointing to mysterious moves in contracts tied to the nation's benchmark index as evidence of questionable trading say one tell-tale sign of abnormal price action can be seen in the so-called straddle on the NSE Nifty 50 Index. A hard-to-explain increase in its price during expiration days has become a common sighting in recent years, though it doesn't always happen. It was visible as recently as mid-May.A straddle is a bet on volatility that involves buying both a bullish and bearish option on the same asset, with the same exercise level. In a normal situation, the price of the strategy falls gradually throughout the day as the expiration approaches.'Over the past two years, on several expiry days, we could see the straddle price go higher by multiples of the starting price, and sometimes not exhibit any theta decay at all' for long periods of time during the session, said Devansh Gupta, managing director at New Delhi-based quantitative trading firm Algoquant, referring to the erosion of value for options as their expiration nears. 'The math made no sense.'Indian markets were plunged into the global spotlight earlier this month, when the nation's regulator temporarily barred Jane Street Group LLC from securities trading in an order citing index manipulation . The US firm has denied the allegations, saying it was deploying an arbitrage Securities and Exchange Board of India didn't specifically mention straddles in its order, though it flagged unexplained variations in option prices. The example it highlighted focused on weekly contracts tracking the NSE Nifty Bank Index, which were discontinued late last year as part of SEBI curbs to halt a derivatives frenzy that triggered billions of dollars in losses for retail straddle became a tool to track whether options prices on expiration days were becoming detached from the underlying asset for large stretches of time, according to about half a dozen high-speed traders that Bloomberg News spoke to before the SEBI order was released. When the unusual pattern emerged, it likely reflected the presence of a whale making big bets in the market, they traders also noticed the abnormal trading in less liquid options on the BSE Sensex Index, among other this month, a SEBI official told Bloomberg News the regulator will expand its market-manipulation probe to include trades around other major equity gauges, including the Nifty 50 and may be patterns similar to those described in the July 4 order in other indexes or trading behaviors reflecting alternate strategies that have not yet been analyzed, SEBI board member Ananth Narayan wrote in the document, adding that the regulator observed some suspicious activity on the May 15 expiration activity has slowed in Indian derivatives since Jane Street was barred from trading. On Thursday, the first major expiration day that followed the ban, the India NSE Volatility Index tracking bets for Nifty 50 swings ended at its lowest level in more than a year, and volume of options on the gauge was lower than on recent expiration total premium paid for the derivatives on the nation's largest bourse tumbled to a four-month low. That day, the strange pattern on the Nifty 50 straddle was nowhere to be seen.
Economic Times
4 days ago
- Business
- Economic Times
Jane St impact: Are mysterious price moves in Nifty 50 options sign of market manipulation?
As India's securities regulator ramps up scrutiny of the options market, some investors are pointing to mysterious moves in contracts tied to the nation's benchmark index as evidence of questionable trading activity. ADVERTISEMENT Traders say one tell-tale sign of abnormal price action can be seen in the so-called straddle on the NSE Nifty 50 Index. A hard-to-explain increase in its price during expiration days has become a common sighting in recent years, though it doesn't always happen. It was visible as recently as mid-May. A straddle is a bet on volatility that involves buying both a bullish and bearish option on the same asset, with the same exercise level. In a normal situation, the price of the strategy falls gradually throughout the day as the expiration approaches. 'Over the past two years, on several expiry days, we could see the straddle price go higher by multiples of the starting price, and sometimes not exhibit any theta decay at all' for long periods of time during the session, said Devansh Gupta, managing director at New Delhi-based quantitative trading firm Algoquant, referring to the erosion of value for options as their expiration nears. 'The math made no sense.' Indian markets were plunged into the global spotlight earlier this month, when the nation's regulator temporarily barred Jane Street Group LLC from securities trading in an order citing index manipulation. The US firm has denied the allegations, saying it was deploying an arbitrage strategy. The Securities and Exchange Board of India didn't specifically mention straddles in its order, though it flagged unexplained variations in option prices. The example it highlighted focused on weekly contracts tracking the NSE Nifty Bank Index, which were discontinued late last year as part of SEBI curbs to halt a derivatives frenzy that triggered billions of dollars in losses for retail traders. ADVERTISEMENT The straddle became a tool to track whether options prices on expiration days were becoming detached from the underlying asset for large stretches of time, according to about half a dozen high-speed traders that Bloomberg News spoke to before the SEBI order was released. When the unusual pattern emerged, it likely reflected the presence of a whale making big bets in the market, they said. The traders also noticed the abnormal trading in less liquid options on the BSE Sensex Index, among other gauges. ADVERTISEMENT Earlier this month, a SEBI official told Bloomberg News the regulator will expand its market-manipulation probe to include trades around other major equity gauges, including the Nifty 50 and may be patterns similar to those described in the July 4 order in other indexes or trading behaviors reflecting alternate strategies that have not yet been analyzed, SEBI board member Ananth Narayan wrote in the document, adding that the regulator observed some suspicious activity on the May 15 expiration day. ADVERTISEMENT Market activity has slowed in Indian derivatives since Jane Street was barred from trading. On Thursday, the first major expiration day that followed the ban, the India NSE Volatility Index tracking bets for Nifty 50 swings ended at its lowest level in more than a year, and volume of options on the gauge was lower than on recent expiration days. The total premium paid for the derivatives on the nation's largest bourse tumbled to a four-month low. That day, the strange pattern on the Nifty 50 straddle was nowhere to be seen. (You can now subscribe to our ETMarkets WhatsApp channel)
Mint
4 days ago
- Business
- Mint
Mysterious Option Trades Put Spotlight on Key Indian Stock Index
As India's securities regulator ramps up scrutiny of the options market, some investors are pointing to mysterious moves in contracts tied to the nation's benchmark index as evidence of questionable trading activity. Traders say one tell-tale sign of abnormal price action can be seen in the so-called straddle on the NSE Nifty 50 Index. A hard-to-explain increase in its price during expiration days has become a common sighting in recent years, though it doesn't always happen. It was visible as recently as mid-May. A straddle is a bet on volatility that involves buying both a bullish and bearish option on the same asset, with the same exercise level. In a normal situation, the price of the strategy falls gradually throughout the day as the expiration approaches. 'Over the past two years, on several expiry days, we could see the straddle price go higher by multiples of the starting price, and sometimes not exhibit any theta decay at all' for long periods of time during the session, said Devansh Gupta, managing director at New Delhi-based quantitative trading firm Algoquant, referring to the erosion of value for options as their expiration nears. 'The math made no sense.' Indian markets were plunged into the global spotlight earlier this month, when the nation's regulator temporarily barred Jane Street Group LLC from securities trading in an order citing index manipulation. The US firm has denied the allegations, saying it was deploying an arbitrage strategy. The Securities and Exchange Board of India didn't specifically mention straddles in its order, though it flagged unexplained variations in option prices. The example it highlighted focused on weekly contracts tracking the NSE Nifty Bank Index, which were discontinued late last year as part of SEBI curbs to halt a derivatives frenzy that triggered billions of dollars in losses for retail traders. The straddle became a tool to track whether options prices on expiration days were becoming detached from the underlying asset for large stretches of time, according to about half a dozen high-speed traders that Bloomberg News spoke to before the SEBI order was released. When the unusual pattern emerged, it likely reflected the presence of a whale making big bets in the market, they said. The traders also noticed the abnormal trading in less liquid options on the BSE Sensex Index, among other gauges. Earlier this month, a SEBI official told Bloomberg News the regulator will expand its market-manipulation probe to include trades around other major equity gauges, including the Nifty 50 and Sensex. There may be patterns similar to those described in the July 4 order in other indexes or trading behaviors reflecting alternate strategies that have not yet been analyzed, SEBI board member Ananth Narayan wrote in the document, adding that the regulator observed some suspicious activity on the May 15 expiration day. Also read: Jane Street Probe in India to Expand Further, SEBI Official Says Market activity has slowed in Indian derivatives since Jane Street was barred from trading. On Thursday, the first major expiration day that followed the ban, the India NSE Volatility Index tracking bets for Nifty 50 swings ended at its lowest level in more than a year, and volume of options on the gauge was lower than on recent expiration days. The total premium paid for the derivatives on the nation's largest bourse tumbled to a four-month low. That day, the strange pattern on the Nifty 50 straddle was nowhere to be seen. With assistance from Savio Shetty. This article was generated from an automated news agency feed without modifications to text.
Mint
5 days ago
- Business
- Mint
Jane Street India Ban Threatens 900% Rally for Asia's Oldest Stock Exchange
Asia's oldest stock exchange was preparing to celebrate its 150th anniversary when a storm of bad news upended the festivities. On Monday, a report revealed deepening losses in equity derivatives among India's retail traders, fueling concerns that the Securities and Exchange Board of India may impose tighter curbs. Just days earlier, the regulator barred Jane Street Group from dealing in local markets, alleging the trading giant manipulated prices to make billions of dollars at the expense of small investors — charges the US firm has denied. Buoyed by a boom in derivatives trading, BSE saw its revenue surge in recent years, even as the regulator began curbing the options frenzy late last year. Now, with mounting fears of even stricter oversight and larger rival National Stock Exchange of India Ltd. preparing for a public listing, BSE faces questions over whether the trading landscape that powered its rise is about to shift. 'This is the time for BSE to innovate and adapt,' said Deven Choksey, managing director at wealth management firm DRChoksey FinServ Pvt. 'The exchange that can come up with differentiated products that solve the issue of individuals losing out to high-frequency traders will be able to corner volumes going ahead.' The Jane Street fallout has already taken a toll on BSE, with the shares on July 4 suffering one of their steepest declines this year — extending a slide that had already begun. The stock, whose price ballooned more than 900% over the past two years, is now down 21% from its June peak. On Friday, it closed at its lowest price in almost two months. According to Jefferies Financial Group Inc., reduced volatility and the curbs on Jane Street led to a 25% week-on-week drop in index options premium turnover across both BSE and NSE on Thursday, the first major derivatives expiration day since the ban. That, the brokerage estimates, could shave 4% off BSE's earnings per share in the current fiscal year. 'Easy gains may be behind BSE,' said Sonam Srivastava, founder of Wright Research in Mumbai. Current valuations reflect hopes of structural change, and BSE will need to deliver on them, she added. Founded in 1875 by cotton merchant Premchand Roychand, BSE began as the Native Share & Stock Brokers' Association, where brokers met under a banyan tree near Mumbai's Town Hall before it moved to it current location on Dalal Street — the equivalent of Wall Street. Over the decades, BSE introduced key innovations including the benchmark BSE Sensex Index in 1986. It now hosts more than 5,000 listed firms. Read: Jane Street Fallout Hits Top India Bourse's Pre-IPO Valuation BSE's journey hasn't been without setbacks. A billion-dollar scandal shook India in 1992, when Mumbai broker Harshad Mehta illegally diverted bank funds into the stock market — an episode that prompted reforms and reshaped the nation's investment landscape. SEBI was granted statutory powers, and the fully-electronic NSE launched in 1994, quickly emerging as a formidable player and forcing its rival to adapt. BSE moved to electronic trading the following year. More recently, as millions of new investors embraced stocks and derivatives, BSE ramped up spending in infrastructure to improve its trading platform and transparency, Chief Executive Officer Sundararaman Ramamurthy said by email. While the exchange's share of India's daily $14 billion cash equities trading — an area long dominated by the NSE — has stagnated at about 6%, the launch of derivatives tied to the Sensex and BSE Bankex Index has helped, he said. BSE's net income surged more than fourfold to 4.94 billion rupees in the quarter ended in March, with derivatives accounting for more than half of it. 'Our efforts have paid off,' said Ramamurthy, who took over in 2023. 'Sensex index derivatives are now the world's fastest-growing derivatives contract.' For Dubai-based Siddharth Balachandran, recent regulatory measures aimed at protecting retail investors offer more reassurance than concern. A shareholder since BSE was privately traded over a decade ago, Balachandran held a 3% stake as of March 31, making him the largest shareholder after Life Insurance Corp. of India Ltd., the nation's top insurer. SEBI's moves 'only improve the foundation of credibility and relative safety that I base my decisions on,' he said. Balachandran, who also owns NSE shares and plans to keep them for the long haul, said his investments are rooted in the belief that the shift in household savings to financial products will accelerate, providing a tailwind for exchanges. BSE, he said, is a proxy for India's growth story. 'My strategy is to align with institutions that can stand the test of time,' Balachandran said. 'BSE was the obvious choice.' Sign up for the India Edition newsletter by Menaka Doshi – an insider's guide to the emerging economic powerhouse, and the billionaires and businesses behind its rise, delivered weekly. This article was generated from an automated news agency feed without modifications to text.
Economic Times
5 days ago
- Business
- Economic Times
Jane Street India ban threatens 900% rally for Asia's oldest stock exchange
Live Events (You can now subscribe to our (You can now subscribe to our ETMarkets WhatsApp channel Asia's oldest stock exchange was preparing to celebrate its 150th anniversary when a storm of bad news upended the Monday, a report revealed deepening losses in equity derivatives among India's retail traders, fueling concerns that the Securities and Exchange Board of India may impose tighter curbs. Just days earlier, the regulator barred Jane Street Group from dealing in local markets, alleging the trading giant manipulated prices to make billions of dollars at the expense of small investors — charges the US firm has by a boom in derivatives trading BSE saw its revenue surge in recent years, even as the regulator began curbing the options frenzy late last year. Now, with mounting fears of even stricter oversight and larger rival National Stock Exchange of India Ltd. preparing for a public listing, BSE faces questions over whether the trading landscape that powered its rise is about to shift.'This is the time for BSE to innovate and adapt,' said Deven Choksey, managing director at wealth management firm DRChoksey FinServ Pvt. 'The exchange that can come up with differentiated products that solve the issue of individuals losing out to high-frequency traders will be able to corner volumes going ahead.'The Jane Street fallout has already taken a toll on BSE, with the shares on July 4 suffering one of their steepest declines this year — extending a slide that had already begun. The stock, whose price ballooned more than 900% over the past two years, is now down 21% from its June peak. On Friday, it closed at its lowest price in almost two to Jefferies Financial Group Inc., reduced volatility and the curbs on Jane Street led to a 25% week-on-week drop in index options premium turnover across both BSE and NSE on Thursday, the first major derivatives expiration day since the ban. That, the brokerage estimates, could shave 4% off BSE's earnings per share in the current fiscal year.'Easy gains may be behind BSE,' said Sonam Srivastava, founder of Wright Research in Mumbai. Current valuations reflect hopes of structural change, and BSE will need to deliver on them, she in 1875 by cotton merchant Premchand Roychand, BSE began as the Native Share & Stock Brokers' Association, where brokers met under a banyan tree near Mumbai's Town Hall before it moved to it current location on Dalal Street — the equivalent of Wall Street. Over the decades, BSE introduced key innovations including the benchmark BSE Sensex Index in 1986. It now hosts more than 5,000 listed journey hasn't been without setbacks. A billion-dollar scandal shook India in 1992, when Mumbai broker Harshad Mehta illegally diverted bank funds into the stock market — an episode that prompted reforms and reshaped the nation's investment landscape. SEBI was granted statutory powers, and the fully-electronic NSE launched in 1994, quickly emerging as a formidable player and forcing its rival to adapt. BSE moved to electronic trading the following recently, as millions of new investors embraced stocks and derivatives, BSE ramped up spending in infrastructure to improve its trading platform and transparency, Chief Executive Officer Sundararaman Ramamurthy said by email. While the exchange's share of India's daily $14 billion cash equities trading — an area long dominated by the NSE — has stagnated at about 6%, the launch of derivatives tied to the Sensex and BSE Bankex Index has helped, he net income surged more than fourfold to 4.94 billion rupees ($58 million) in the quarter ended in March, with derivatives accounting for more than half of it.'Our efforts have paid off,' said Ramamurthy, who took over in 2023. 'Sensex index derivatives are now the world's fastest-growing derivatives contract.'For Dubai-based Siddharth Balachandran, recent regulatory measures aimed at protecting retail investors offer more reassurance than concern. A shareholder since BSE was privately traded over a decade ago, Balachandran held a 3% stake as of March 31, making him the largest shareholder after Life Insurance Corp. of India Ltd., the nation's top moves 'only improve the foundation of credibility and relative safety that I base my decisions on,' he who also owns NSE shares and plans to keep them for the long haul, said his investments are rooted in the belief that the shift in household savings to financial products will accelerate, providing a tailwind for he said, is a proxy for India's growth story.'My strategy is to align with institutions that can stand the test of time,' Balachandran said. 'BSE was the obvious choice.'
