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Economic Times
5 days ago
- Business
- Economic Times
Jane Street saga: Nilesh Shah gives 3 reasons why no HFT will do it in China
India's capital markets may be vulnerable to sophisticated derivatives manipulation because, unlike China, they lack key deterrents that would dissuade high-frequency traders (HFTs) from attempting similar schemes, according to Nilesh Shah, managing director of Kotak Mahindra Mutual Fund. ADVERTISEMENT In a sharply-worded opinion piece published in the Financial Express, Shah drew a stark contrast between Indian and Chinese markets, highlighting three structural deterrents that he believes make such manipulative conduct nearly impossible in China. 'First, Chinese markets are largely closed to foreign speculators for such activities, limiting access,' Shah wrote. 'Second, Chinese regulators wield formidable power, employing tactics akin to sam, dam, dand, bhed (persuasion, fines, punishment, or division) to enforce deterrence and compliance. Third, the memory of a well-known hedge fund being squeezed by the China Investment Corporation in a short renminbi trade serves as a powerful deterrent.' Shah argued that while the Securities and Exchange Board of India's (Sebi) recent action against Jane Street showcases its surveillance and forensic capabilities, more needs to be done to make India's market enforcement truly effective. He pointed to the persistence of unresolved cases from the 1992 securities scam and drew comparisons with the U.S. legal system, where mechanisms exist to recover investor losses, citing the Bernie Madoff likened the Indian F&O markets to a village derivatives bazaar where a powerful trader repeatedly exploits a rigged cycle, drawing a parallel to Jane Street's alleged behaviour. He cautioned that India's institutional investors, constrained by regulation and trading strategies such as volume-weighted average price (VWAP), lack the aggression and agility to act as a counterforce to such entities. ADVERTISEMENT 'A new institutional mechanism equipped with advanced data analytics, high-speed connectivity, and access to leverage is needed,' Shah said, 'as is the ability to act decisively to neutralise HFT dominance.' Sebi on July 3 barred U.S.-based Jane Street and four affiliated entities from accessing Indian markets, accusing them of manipulating index levels on 18 expiry days over a two-year period and profiting disproportionately from index options trades. The regulator has ordered the impounding of Rs 4,840 crore in alleged illegal gains. ADVERTISEMENT Also read | Rs 735 crore in 1 day! Jane Street's most profitable day on Dalal Street was built on Nifty Bank's fallShah proposed five systemic reforms that he believes are essential to restore integrity, protect retail investors, and ensure India doesn't become 'a playground for manipulative merchants.' ADVERTISEMENT Shah called for fortifying Sebi's enforcement ability with a sharper legal toolkit. While praising the regulator's data-driven action against Jane Street, he pointed out that India's justice system lacks the speed and power required to address modern financial frauds.'Commercial crimes, like market manipulation, often cause greater societal harm but face lenient treatment due to the absence of a 'dead body',' Shah said. 'Empowering Sebi with robust legal tools and fostering a fear of swift punishment are critical to deterring future violations.' ADVERTISEMENT Shah warned that India's institutional investors, constrained by rules and low-risk strategies like volume-weighted average price (VWAP), cannot counterbalance aggressive HFTs like Jane Street.'A new institutional mechanism equipped with advanced data analytics, high-speed connectivity, and access to leverage is needed,' he said, 'as is the ability to act decisively to neutralise HFT dominance.'Drawing parallels with past regulatory failures, Shah said Sebi must go beyond monetary recovery and impose deterrent penalties. He cited the Bhopal gas tragedy as a cautionary tale of limited consequences for catastrophic wrongdoing.'Sebi's order against Jane Street… must go beyond recovering manipulated profits,' Shah wrote. 'An exemplary penalty is needed to deter future manipulations.'Addressing the surge in retail F&O trading, Shah likened the speculative frenzy to addiction fuelled by greed and social media hype.'In our F&O markets, a massacre occurs every week, where millions of Indians get killed economically, not by bullets but by their greed,' he said. He compared quick-profit seekers to drug addicts and the mythological demon Raktabij: 'Slay one, and a hundred more emerge.'Shah advocated statutory warnings on derivatives trading, tighter restrictions on promotion, and possibly a levy on F&O trades to fund investor education and education the ultimate antidote to retail vulnerability, Shah urged regulators to scale up literacy efforts and implement tougher gatekeeping for risky products. 'The anti-dote to greed is financial education,' he said, recommending that traders be required to pass qualifying exams before being allowed to engage in leveraged trades. While Sebi's action has stirred much-needed conversation, Shah's central message is that enforcement alone is not enough.'Unchecked financial muscle and speculative frenzy can destabilise markets leaving retail investors vulnerable,' Shah said. 'Only by addressing these issues head-on can India prevent its markets from becoming playgrounds for manipulative merchants.' Also read | Jane Street clampdown raises big questions for Sebi: Can the regulator stop another derivatives fraud? (Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of the Economic Times)
Time of India
5 days ago
- Business
- Time of India
Jane Street saga: Nilesh Shah gives 3 reasons why no HFT will do it in China
India's capital markets may be vulnerable to sophisticated derivatives manipulation because, unlike China, they lack key deterrents that would dissuade high-frequency traders (HFTs) from attempting similar schemes, according to Nilesh Shah, managing director of Kotak Mahindra Mutual Fund. In a sharply-worded opinion piece published in the Financial Express, Shah drew a stark contrast between Indian and Chinese markets, highlighting three structural deterrents that he believes make such manipulative conduct nearly impossible in China. by Taboola by Taboola Sponsored Links Sponsored Links Promoted Links Promoted Links You May Like 5 Books Warren Buffett Wants You to Read In 2025 Blinkist: Warren Buffett's Reading List Undo 'First, Chinese markets are largely closed to foreign speculators for such activities, limiting access,' Shah wrote. 'Second, Chinese regulators wield formidable power, employing tactics akin to sam, dam, dand, bhed (persuasion, fines, punishment, or division) to enforce deterrence and compliance. Third, the memory of a well-known hedge fund being squeezed by the China Investment Corporation in a short renminbi trade serves as a powerful deterrent.' Regulatory muscle must match market complexity Shah argued that while the Securities and Exchange Board of India's ( Sebi ) recent action against Jane Street showcases its surveillance and forensic capabilities, more needs to be done to make India's market enforcement truly effective. He pointed to the persistence of unresolved cases from the 1992 securities scam and drew comparisons with the U.S. legal system, where mechanisms exist to recover investor losses, citing the Bernie Madoff case. Live Events Shah likened the Indian F&O markets to a village derivatives bazaar where a powerful trader repeatedly exploits a rigged cycle, drawing a parallel to Jane Street's alleged behaviour. He cautioned that India's institutional investors, constrained by regulation and trading strategies such as volume-weighted average price (VWAP), lack the aggression and agility to act as a counterforce to such entities. 'A new institutional mechanism equipped with advanced data analytics, high-speed connectivity, and access to leverage is needed,' Shah said, 'as is the ability to act decisively to neutralise HFT dominance.' Sebi on July 3 barred U.S.-based Jane Street and four affiliated entities from accessing Indian markets, accusing them of manipulating index levels on 18 expiry days over a two-year period and profiting disproportionately from index options trades. The regulator has ordered the impounding of Rs 4,840 crore in alleged illegal gains. Also read | Rs 735 crore in 1 day! Jane Street's most profitable day on Dalal Street was built on Nifty Bank's fall 5 reforms to prevent another Jane Street: Shah proposed five systemic reforms that he believes are essential to restore integrity, protect retail investors , and ensure India doesn't become 'a playground for manipulative merchants.' 1. Strengthen regulatory powers Shah called for fortifying Sebi's enforcement ability with a sharper legal toolkit. While praising the regulator's data-driven action against Jane Street, he pointed out that India's justice system lacks the speed and power required to address modern financial frauds. 'Commercial crimes, like market manipulation, often cause greater societal harm but face lenient treatment due to the absence of a 'dead body',' Shah said. 'Empowering Sebi with robust legal tools and fostering a fear of swift punishment are critical to deterring future violations.' 2. Create counterbalancing mechanisms Shah warned that India's institutional investors, constrained by rules and low-risk strategies like volume-weighted average price (VWAP), cannot counterbalance aggressive HFTs like Jane Street. 'A new institutional mechanism equipped with advanced data analytics, high-speed connectivity, and access to leverage is needed,' he said, 'as is the ability to act decisively to neutralise HFT dominance.' 3. Treat commercial crime seriously Drawing parallels with past regulatory failures, Shah said Sebi must go beyond monetary recovery and impose deterrent penalties. He cited the Bhopal gas tragedy as a cautionary tale of limited consequences for catastrophic wrongdoing. 'Sebi's order against Jane Street… must go beyond recovering manipulated profits,' Shah wrote. 'An exemplary penalty is needed to deter future manipulations.' 4. Curb speculative mania Addressing the surge in retail F&O trading, Shah likened the speculative frenzy to addiction fuelled by greed and social media hype. 'In our F&O markets, a massacre occurs every week, where millions of Indians get killed economically, not by bullets but by their greed,' he said. He compared quick-profit seekers to drug addicts and the mythological demon Raktabij: 'Slay one, and a hundred more emerge.' Shah advocated statutory warnings on derivatives trading, tighter restrictions on promotion, and possibly a levy on F&O trades to fund investor education and protection. 5. Prioritise financial education Calling education the ultimate antidote to retail vulnerability, Shah urged regulators to scale up literacy efforts and implement tougher gatekeeping for risky products. 'The anti-dote to greed is financial education ,' he said, recommending that traders be required to pass qualifying exams before being allowed to engage in leveraged trades. Beyond detection: a warning for the future While Sebi's action has stirred much-needed conversation, Shah's central message is that enforcement alone is not enough. 'Unchecked financial muscle and speculative frenzy can destabilise markets leaving retail investors vulnerable,' Shah said. 'Only by addressing these issues head-on can India prevent its markets from becoming playgrounds for manipulative merchants.' Also read | Jane Street clampdown raises big questions for Sebi: Can the regulator stop another derivatives fraud?
Time of India
22-06-2025
- Business
- Time of India
D-Street braces for 'risk-off' selloff
MUMBAI: Investors on the edge after an escalation in the West Asia conflict with most Dalal Street players expecting the Sensex to open lower on Monday. They also expect crude oil prices to spike, which in turn would put pressure on the rupee. On Sunday, after the US bombed three nuclear sites in Iran and the latter resolved to close the Strait of Hormuz through which about 20% of the world's crude oil and natural gas pass, market players said oil prices could spike soon. On Friday, as Dalal Street investors ignored the geopolitical tensions between Iran and Israel, the sensex recorded a four-digit points gain to close at 82,408 points. And Nifty on the NSE gained 319 points to close at 25,112 points. Globally, Brent was trading at above the $77/barrel level while WTI crude was around the $75 level. Both were trading at near their four-month high levels. Despite the global headwinds, India's economic fundamentals on the other hand could act as a balancing act to those negative factors, Kotak Mahindra Mutual Fund MD Nilesh Shah said. "Indian equity and rates market is like a man having average temperature with one leg in cold water and the other in hot water. Domestic factors support current valuation for long term investors expecting moderate returns. (However) global factors from (the US president Donald) Trump's policies to oil price/supply are boiling hot," he said. Shah said that investors need to keep a watch on the availability of oil as well as the price. "We have enough forex reserves to manage higher oil prices in double digits. (However) oil prices crossing triple digit or restricted supply will have an adverse impact on the market." Shah added that investors should use any market correction as an opportunity to accumulate while traders should remain on a cautious mode. The geopolitical uncertainty could also push up prices of gold as investors move to 'risk off' mode, meaning they sell risky assets like equities and move to haven assets like gold and govt bonds, market players said. A section of the market players believes that in case Iran doesn't react aggressively to the US's move to bomb its three nuclear sites, the markets may soon recover after a negative opening in Monday's early trade. One trader even pointed out that TA 35, the main stock market benchmark in Israel, was up more than 1% in Sunday's trading session, indicating investors in Israel had ignored the geopolitical tensions. Stay informed with the latest business news, updates on bank holidays and public holidays . AI Masterclass for Students. Upskill Young Ones Today!– Join Now
Zawya
05-03-2025
- Business
- Zawya
Aditya Birla Finance eyes $172mln from short 3.5-year bond
Aditya Birla Finance is planning to raise Rs15bn (US$172m) from short 3.5-year bonds at 7.9413%, according to market sources. The non-banking financial company is targeting Rs2.5bn plus a greenshoe of Rs12.5bn from bonds due August 7 2028. It is seeking bids tomorrow from 11:30am to 12:30pm India time. Kotak Mahindra Mutual Fund is heard to be the anchor investor. Icra and Crisil have assigned a AAA (stable) rating to the secured notes. Source: IFR
