Latest news with #JaneStreetCapital
Mint
3 days ago
- Business
- Mint
Retail investors are walking the wire. Sebi should let VCs join the show.
The Securities and Exchange Board of India (Sebi) recently found that Wall Street financial firm Jane Street Capital had manipulated the cash and forward markets, fleeced hapless Indian investors, and made millions of dollars. For many, this would evoke images of The Wolf of Wall Street, howling Greed is Good, rebirth of the East India Company, and finance capital, rising, and shimmering, shapeless and threatening, from Lenin's tract on imperialism. It might be more useful to interpret this as India's shoe-shine-boy-offering-stock-tips moment, and remove the restriction on venture capital (VC) funds raising money from the public. The story goes that a stockbroker named Joseph, taking a break from hollering out the names of the stocks at the New York Stock Exchange's trading ring, walked around at Wall Street, and decided to let a lad offering a shine do his shoes, while he reflected on the good times America was going through in the late 1920s. Shining his shoes, the boy offered Joseph some hot tips for the market. If shoeshine boys were offering stock tips, Joseph realized that the market had reached fever-pitch, and it was time to get out. He sold his stocks and shorted the market, that is, sold shares he did not have, borrowing the shares to sell, and, as markets fell, used a fraction of the proceeds to buy back the shares to replace the borrowed shares. He made $150 million as Black Monday and Black Tuesday rolled out in late October 1929. Joseph used the money he made to give a head start to his brood of nine children. Two of them, John (Jack) and Robert (Bobby), subsequently made history. Joseph's surname was Kennedy. If Kennedy were alive today, and he were offered tips by a shoeshine boy on what stock options to buy, he would float a venture fund and list it on the market, regulators permitting. Risk-on mode Jane Street's precise shenanigans are incidental to the discussion here. What matters is the readiness of Indian participants in the futures and options (F&O) segment of the market to lose their shirts. Sebi has found that 91% of F&O players lose their money, while the gainers are high-frequency traders like Jane Street. Those who burn their hands in the F&O market do not retreat in sorrow. They return with more funds and hand them over to the likes of Jane Street. India accounts for approximately 60% of global stock futures and options volume. Its derivatives trade volume is around 350-400X the cash market volume—far exceeding the 5–15X seen in developed markets, according to a 2023 Axis Mutual Fund report. This behaviour is in line with that of investors who pour their life's savings into systematic investment plans (SIPs) of mutual funds—all of whom chase the same set of viable stocks and push up their prices to unrealistic multiples of the underlying companies' earnings, weighted for growth prospects. For Indian savers, mutual funds are what housing was to Chinese savers until recently. A stunted financial sector in China left real estate as the primary vehicle for individual savings, leading people to buy second and third homes. The solution to the dearth of investment-worthy companies that are not overvalued is two-fold: channel a portion of savings to markets abroad and their companies, and increase the number of investible companies. India does not save and invest enough at home to export savings without hurting its own growth. The preferable option is to create a new crop of profitable Indian companies. How do we do that? This is where venture capital comes in. Insurmountable spirit India has the talent to create new products and services. It offers vast scope for import substitution in the entire range of electronics, medical equipment, consumer goods, consumer durables, electric automobiles and components, energy transition products, telecom kits, and whatever else we gleefully import from China. A vast and totally new area is opening up in defence related goods and services. India has the talent to produce this. Indians are constrained by collapsing bridges, roads that are unsure whether to self-identify as roads or impromptu swimming pools; thousands of laws that can innocuously be breached to send the violator to prison; deficient access to institutional capital; a tradition that deems risk-taking as illegitimate for all but a tiny group; a culture that discourages new knowledge by holding all knowledge to be finite and contained in the scriptures; a hierarchical social structure that makes the questioning of established authority sacrilege; an education system that privileges rote learning and grades, while shunning critical thinking; and an R&D outlay of just 0.64% of gross domestic product (GDP). Yet, India is home to the world's third-largest herd of unicorns, startups valued at over a billion dollars. Indians do world-class R&D at proliferating global capability centres in the country to create value for multinationals. Indians abroad lead companies and start up big time. The point is to make access to risk capital more prolific. Some of the funded projects would become stellar successes and make enough money to make up for those that fail. Ordinary investors normally shelter from such extreme risk and reward. That is why Sebi bars VC funds from raising capital from the public. Indian investors' appetite for risk is something else. It makes a lot of sense to use that appetite to redirect their funds to create new, exciting companies, instead of inflating the prices of existing companies to unrealistic levels. Sebi should remove its restrictions on VC funds accepting money from the public. Let India be the first country to let shoeshine boys spread the word on hot venture stocks to buy. For more such views, read Mint Snapview.
Indian Express
5 days ago
- Business
- Indian Express
Jane Street vs SEBI: As trading firm seeks relief, a recall of its actions and the regulator's allegations of market manipulation
India's markets regulator has banned the New York-based proprietary trading firm Jane Street Capital for alleged market manipulation to make major illicit gains that it took out of the country. Jane Street has refuted the allegations about unlawful trading practices but has deposited more than Rs 4,800 crore in an escrow account, in compliance with the requirements of the interim order passed by the Securities and Exchange Board of India (SEBI) on July 3. In a leaked email sent to employees, Jane Street said it was 'beyond disappointed' with SEBI's 'extremely inflammatory' accusations. The company is set to contest the ban and the freezing of some of its funds. Jane Street has formally requested access back to its trading activities in India. SEBI has said it is in the process of examining the company's request. How did things build up to SEBI's investigation? On January 17, the privately owned hedge fund took home a whopping Rs 735 crore in a single day by allegedly implementing algorithms that allowed them to manipulate NIFTY and Bank NIFTY index prices. This wasn't a one-off – between January 2023 and March 2025, Jane Street allegedly made unlawful net profits of more than Rs 36,500 crore. The capital markets watchdog started looking closely at Jane Street's operations in April 2024, after taking note of a legal dispute in the United States (which was, however, quickly settled) between Jane Street and a rival company that had hired two employees who were crucial in the development of these confidential algorithms. SEBI cracked down this month, precluding Jane Street from trading in the Indian markets and ordering banks to freeze more than Rs 4,800 crore in their accounts. In a 105-page interim order, SEBI accused Jane Street of market manipulation. How did Jane Street allegedly seek to dodge SEBI? Jane Street relied on several factors to pull off its alleged illegal 'operation' in the Indian market. These include the creation of multiple Indian subsidiaries to bypass a requirement in SEBI's 2019 'Foreign Portfolio Investors' regulation that states, 'A foreign portfolio investor shall transact in the securities in India only on the basis of taking and giving delivery of securities purchased or sold.' This rule blocks intraday trading (buying or selling of stocks on the same day they were obtained, all before the market closes) for foreign firms. In this case, Jane Street's Indian subsidiaries were technically allowed to indulge in intraday stock trading, 'pumping and dumping' prices for their convenience. All this happened while foreign subsidiaries (owned by Jane Street as well) held positions on optimal options that generated significant profits. How did this alleged strategy work? SEBI suspects that Jane Street's algorithm-based strategy consisted of two main stages: Intra-day Index Manipulation and Expiry Day Manipulation. Early in the day, Jane Street's algorithms would rapidly buy major banking stocks that were components of the 'Bank NIFTY' index. This would artificially drive the price of the index up. Noticing this, thousands of retail investors would jump on the rise, buying call options and selling puts, hoping for persistent growth. However, the rise would be spurious, allegedly orchestrated by Jane Street, which was buying put options and selling calls. Notably, on contract expiry days, Jane Street's algorithm would dump its index futures and holdings, resulting in a sudden decline of the share price. This led to massive losses for retail investors, whose call options would be labeled useless and who would be forced to pay the premium. For Jane Street, the opposite happened – they were able to cash out on their put options for monumental returns. Without their specifically catered algorithms, Jane Street would not have been able to pull off this alleged operation at the scale that they did. The algorithms were able to make multiple targeted trades within milliseconds of executing. The derivatives market predominantly consists of futures and options (F&O) trading. Futures are contracts that legally bind holders to buy or sell a certain asset at an agreed-upon price at some time in the future, regardless of what the price is then. Thus, this benefits buyers when the price has increased and sellers when it has decreased (compared to the predetermined price). Options are contracts that give buyers the right (not an obligation) to purchase an asset from a willing seller at some time in the future. To ensure fairness, buyers are required to pay the seller a premium right after signing. There are two types of options contracts: call options and put options. Call options give holders the ability to buy the asset at the predetermined price. Put options allow the holders to sell the asset at the predetermined price. So, if the price does not suit the holders' options, they would not be forced to buy or sell their asset but would still have to pay the premium. F&O trading is one of the riskiest trading choices a retail investor can make. According to SEBI, more than 9 out of 10 retail investors in India have lost money in FY25 trading on F&Os. However, it is possible to minimize these risks by understanding ways to optimally use F&O trading, potentially in terms of limiting capital expended, enhancing risk tolerance, and more. The writer is a student and a summer intern at The Indian Express
Time of India
10-07-2025
- Business
- Time of India
How Jane Street co-founder landed in a coup controvesy
Live Events (You can now subscribe to our (You can now subscribe to our Economic Times WhatsApp channel New York-based trading firm Jane Street Capital was recently barred from the Indian securities market by markets regulator Sebi which allegeed the company used its trading strategies to manipulate stock market, leading to losses for millions of retail investors. Jane Street has rejected the allegation. This is not the first controversy the unusually secretive trading company has run June, the quiet, secretive world of high-frequency trading was rocked by revelations that Robert Granieri , a low-profile co-founder of Jane Street Capital, was financially linked to an alleged coup attempt in South Sudan. Granieri, a reclusive but powerful figure in finance, claimed he had been duped. But this revelation threw an uncomfortable spotlight on both Granieri and Jane Street Capital, the enigmatic firm he helped create and still the heart of the controversy is Peter Ajak , a Harvard Fellow and economist, who is now being prosecuted in the US for allegedly orchestrating a scheme to overthrow South Sudan's government and install himself as leader. US prosecutors allege that Granieri, perhaps unwittingly, bankrolled part of this operation. Federal prosecutors in Arizona first charged Ajak and activist Abraham Keech in March 2024 with conspiring to illegally export arms to South Sudan, their home country, to overthrow its government. Both have pleaded not guilty."The indictment reads like a cinematic plot: A Harvard Fellow and another activist allegedly wanted to buy AK-47s, Stinger missiles and grenades to topple South Sudan's government. What they lacked was enough cash," wrote Bloomberg in defense is straightforward: he believed he was funding a humanitarian initiative aimed at promoting democracy and economic growth in the war-ravaged East African nation. He claims Ajak misrepresented the true intent of the reported by the New York Post in June, Granieri allegedly provided $7 million in two payments after meeting Ajak in February 2024 at a Midtown Manhattan condominium, prosecutors said. Ajak's lawyers stated in a May court filing, which was reviewed by The Post and first reported by Bloomberg, that Granieri's financing was 'vital to the plan". They claimed in a court document that without his support, the alleged conspiracy would have been impossible. The attorney for the Jane Street founder, whose firm had hired now-convicted fraudster and former FTX CEO Bankman-Fried in 2013, claimed he was misled by Ajak, whom he believed was a human rights activist. 'Granieri is a longtime supporter of human rights causes,' his lawyer was quoted by Bloomberg as saying. 'In this case, the person Rob thought was a human rights activist defrauded Rob and lied about his intentions.'The New York Post further reported that the case also references chess champion Garry Kasparov, though he is not named as a defendant nor accused of any wrongdoing, for allegedly connecting Ajak with Granieri through their shared work with the Human Rights Foundation. Ajak, a former child soldier who resettled in the US, studied at Harvard's Kennedy School and worked as a World Bank economist before becoming a South Sudanese opposition activist. He and Keech allegedly met with an undercover agent and inspected weapons in a Phoenix warehouse before their arrest, the May 29 motion said. Defense attorneys allege US authorities were aware of the plan, citing a 'public authority' defense and claiming that the State Department told Ajak in October 2023 it would not support non-democratic regime change. They also accused prosecutors of selectively targeting Ajak and Keech, both black men, while sparing Granieri and the legal system will eventually determine the extent of Granieri's culpability, the South Sudan controversy marked a rare public misstep for Granieri and Jane Street Capital. For a firm that has thrived on discretion and outsmarting rivals in silence, the spotlight must have been in 2000, Jane Street Capital is a global proprietary trading firm operates across a range of asset classes, including ETFs, equities, bonds and cryptocurrencies. It has earned a reputation for being both highly profitable and fiercely secretive. With headquarters in New York and offices in many countries, Jane Street is a dominant force in the world of quantitative finance. It is known for hiring elite mathematicians, physicists and computer scientists, and cultivating a culture more akin to a university research department than a traditional trading sets Jane Street apart is its organizational structure. There is no CEO. Instead, it functions as a kind of technocratic republic, where around 40 senior partners run the firm collectively. Among them, Granieri, the last remaining co-founder still active in the firm, is considered first among equals. Unlike other Wall Street firms that engage with media, public investors, and regulatory frameworks in a highly visible way, Jane Street tends to shun attention. Even internally, information flows are tightly controlled. This secrecy has allowed Jane Street to build advanced trading systems and algorithms without interference or allegations against Granieri put it in headlines in June, soon it was hit by a far bigger controversy when Sebi accused it of stock manipulation. Indian regulators have opened a broader probe into Jane Street's activities, while the company denied any wrong-doing on its part. The ban came after an unusually volatile quarter, where Jane Street reportedly made record profits during a spike in global tariffs. Its revenues rivaled those of Goldman Sachs and Morgan Stanley . That kind of financial firepower has always kept Jane Street in regulators' crosshairs, but this time, global scrutiny is controversies come at a time when Jane Street Capital is joining the big league. Its net trading revenues hit $20.5 billion last year, up from $2.1 billion in 2019. In the first quarter of 2025, its net trading revenues hit $7.2 billion, surpassing those of Morgan Stanley and within touching distance of Goldman Sachs.
Economic Times
08-07-2025
- Business
- Economic Times
Eye on trades, not curbs: How far can smart money go before it's called fraud?
Sebi's order last week, accusing Jane Street Capital of manipulating the stock market, is an acknowledgement of what some have suspected for a long time. Surging valuations of risk assets and the influx of thousands of new investors into the trading arena have propelled Indian derivatives to the top of the global volumes leaderboard. Meanwhile, vulnerabilities in a system prone to potential manipulation went unnoticed amid the euphoria of the middle class' immersion in the equity by the regulator, and details that the probe team delved into, make it the most interesting case in Sebi's three-decade history. The regulatory impounding of illegal gains of ₹4,843 cr is unprecedented, too. The magnitude of Jane Street's operations in the Indian markets and the regulatory reaction throw up questions about the state of equities market, regulations and legal provisions to deal with such practices. The loss from the punitive order is too much for anyone to let go unchallenged. Analysis and matching of derivatives trades and transactions in the cash market are sufficient to conclude the accused company's intention to profit from its simultaneous actions in both markets rather than benefiting from general market movements independent of its it manipulation, strategy or an elaborate web of fraud - or is it just that a well-funded company exploited a lack of rules specifying individual intra-day exposure in the derivatives market, and a lack of effective surveillance?There are many regulations the order cites as violations by Jane Street, but the one by which it could be hooked is Regulation 4(E) of the Prohibition of Fraudulent and Unfair Trade Practices Regulations. This clause states, 'Any act or omission amounting to manipulation of the price of a security, including influencing or manipulating the reference price or benchmark price of any securities', is a fraudulent or unfair analysis of trades reveals that there is a pattern that helped Jane Street benefit substantially by influencing stock and index prices. But the question remains: is this manipulation or a legitimate strategy?Sebi order says, 'It must be emphasised that trading profits by themselves are certainly not an indication of any illegality.' Then what? 'The scale of profits made does not form the basis of the examination's ultimate conclusions/findings - only the underlying trading patterns observed do.' While the regulator may have zeroed in on market manipulation, it probably did not have legal tools to penalise, which is reflected in its nudging of NSE to serve a 'caution letter' to Jane Street in February. To be fair to Sebi, it has been warning retail investors about how they have been losers in derivatives market. While its internal systems may have thrown up warnings from the 'Oh god, lucky' trades of big institutions, it lacked the legal ground to halt instance, Jane Street disclosed all open positions. It declared its Indian subsidiary that squared off cash market positions, which are barred for FPIs. Much of what FPI has done appears to be in line with the does the regulator prevent such instances? It appears that the stock market, despite growing, may still be shallow for someone with a big wallet. The instant reaction would be to curb 'speculation' and 'fraud' with tougher rules. Calling for restrictions is immature in a market that has become the biggest and is budgeted to contribute ₹78,000 cr in securities transaction tax this year. Sebi can address issues that it found to have helped Jane Street. It may have been early in warning about risks of derivatives market but waited until media reports on a legal dispute in the US between Jane Street and its former staff to begin investigations. There is an urgency to react.A surveillance system may only be as good as rules permit it to act on abnormal activities. Sebi and stock exchanges must frame rules that limit concentrated trades by individuals or a few acting together - as in the case of Jane Street, where it constituted nearly a fifth of trades at certain says, 'They were aware, therefore, that the stock and BANKNIFTY prices were being held artificially up for a short period of time by their own aggressive actions in the underlying cash and futures markets.'It may be a valid interpretation of trades, but can it legally amount to manipulation, fraud or just an unfair trade practice?There is some noise calling for a bifurcation of retail and institutional markets, but that could dry up liquidity. What is needed is improved surveillance, not Elevate your knowledge and leadership skills at a cost cheaper than your daily tea. As GenAI puts traditional BPO on life support, survival demands a makeover India Inc is ditching dollar loans. Waning appetite for debt or rising faith in rupee? Is gold always the best bet? Think again Do bank stress tests continue to serve their intended purpose? Darkness at noon: Can this reform succeed after failing four times? Stock Radar: Havells India showing signs of recovery after 25% drop from highs; time to buy or stay put? Consumption green shoots: Time to look at FMCG stocks again, but very selectively; 4 FMCG stocks with upside potential of up to 31% Weekly Top Picks: These stocks scored 10 on 10 on Stock Reports Plus
Zawya
04-07-2025
- Business
- Zawya
India market regulator to widen probe into Jane Street, source says
India's markets regulator has widened its probe into alleged market manipulation by U.S. securities trading firm Jane Street to include other exchanges and indices, according to a source, after barring it from trading in the Indian markets earlier on Friday. The Securities and Exchange Board of India (SEBI) barred Jane Street from buying and selling securities in the Indian market and also seized $567 of its funds. SEBI and Jane Street did not immediately respond to Reuters' requests for comment. (Reporting by Jayshree P. Upadhyay in Mumbai and Nandan Mandayan in Bengaluru, Editing by Louise Heavens)
