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Economic Times
a day ago
- Business
- Economic Times
Jane Street aftermath: 4 stocks suffer Rs 12,000 crore wipeout in collateral damage
Tired of too many ads? Remove Ads Tired of too many ads? Remove Ads Popular in Markets Tired of too many ads? Remove Ads Markets regulator Sebi's investigation into Jane Street may have unintended consequences for Dalal Street, as was evident on Friday when four capital market-related stocks collectively lost Rs 12,000 crore in market regulatory action has exposed the market's dependence on proprietary trading firms and their domestic partners. What began as targeted enforcement against alleged market manipulation by the US-based trading giant quickly spilled over, impacting the broader capital markets infrastructure, even affecting firms with no regulatory issues. Nuvama Wealth Management , Jane Street's local trading partner in India, suffered the steepest decline on Friday, falling 11.26%, despite not being implicated in any wrongdoing in Sebi's investigation. Shares of stock exchange BSE and Angel One dropped around 6% each, while CDSL fell over 2%. The combined erosion in market capitalisation was nearly Rs 12,000 regulatory action targeted Jane Street and its affiliates for manipulating prices in Bank Nifty index options and underlying stocks, resulting in an order to disgorge unlawful gains of Rs 4,844 the market's reaction to Nuvama highlights how regulatory action against one entity can impact its business partners—even when they face no direct allegations. The sharp fall in Nuvama's stock reflects investor concerns about potential revenue loss from the possible exit of a significant client, regardless of the firm's conduct."Prop trading firms like Jane Street account for nearly 50% of options trading volumes," noted Zerodha founder Nithin Kamath, highlighting the market's concentration risk. "If they pull back—which seems likely—retail activity (around 35%) could take a hit too. So this could be bad news for both exchanges and brokers."Also Read | Explained: What is Jane Street and how it made Rs 36,500 crore profit by gaming Dalal Street The scale of the market's dependence on proprietary trading firms becomes evident through the numbers. When a single entity controls half of the options volume, its potential exit creates significant uncertainty about future market liquidity and trading activity."Jane Street is one of the largest traders contributing to Indian markets," said Siddarth Bhamre, Head of Institutional Research at Asit C. Mehta . "When big players are banned for wrongdoing, others become cautious and reduce activity, leading to lower volumes. Traders may also face fewer counterparties, potentially causing a further drop in F&O volumes ahead."The concerns extend beyond immediate volume impacts. Ashish Nanda, President & Chief Digital Business Officer at Kotak Securities, outlined the broader implications: "HFTs will surely be feeling the heat. Many will be re-assessing their strategies. Will they slow down? The fact is that HFT firms provide a lot of liquidity in the markets. If there's a reduction in activity by HFTs, it will also impact retail volumes."The immediate market reaction suggests traders are already pricing in a potential decline in volumes across Indian capital markets. Analysts warn that the regulatory action could put pressure on the revenue of intermediaries heavily dependent on derivatives trading, with volumes likely to shrink in response to Sebi's measures against one of the segment's largest prop trading One founder Dinesh Thakkar offered a more optimistic view, arguing that India's market opportunity remains "structural, not cyclical—and certainly not dependent on any one firm." He pointed to the surge in retail participation in equity derivatives—from just 2% in 2018 to over 40% in 2025—as evidence of strong underlying market fundamentals."When one player exits, others step in—and often, very fast," Thakkar noted, referencing global trading giants like Citadel Securities, IMC Trading, Optiver, Jump Trading, and Millennium, which are already expanding into India, setting up local entities, hiring talent, and investing in this optimism, the immediate challenge is gauging the actual impact on trading volumes. Zerodha's Nithin Kamath acknowledged the uncertainty: "The next few days will be telling. F&O volumes might reveal just how reliant we are on these prop giants."The Jane Street episode underscores how regulatory action—while targeting specific misconduct—can have broader ripple effects across the derivatives ecosystem. The Rs 12,000 crore selloff on Friday reflects investor concerns over volume contraction and revenue pressure, particularly for intermediaries with direct exposure to the banned the market adjusts to this new reality, attention will turn to whether other international trading firms can fill the liquidity vacuum left by Jane Street's exit—and how domestic players recalibrate their models to sustain revenue in a changing regulatory Read | Make $1 billion loss in stock futures to earn $5 billion profit in options: Sebi exposes Jane Street's Baazigar strategy
Time of India
a day ago
- Business
- Time of India
Jane Street aftermath: 4 stocks suffer Rs 12,000 crore wipeout in collateral damage
Tired of too many ads? Remove Ads Tired of too many ads? Remove Ads Popular in Markets Tired of too many ads? Remove Ads Markets regulator Sebi's investigation into Jane Street may have unintended consequences for Dalal Street, as was evident on Friday when four capital market-related stocks collectively lost Rs 12,000 crore in market regulatory action has exposed the market's dependence on proprietary trading firms and their domestic partners. What began as targeted enforcement against alleged market manipulation by the US-based trading giant quickly spilled over, impacting the broader capital markets infrastructure, even affecting firms with no regulatory issues. Nuvama Wealth Management , Jane Street's local trading partner in India, suffered the steepest decline on Friday, falling 11.26%, despite not being implicated in any wrongdoing in Sebi's investigation. Shares of stock exchange BSE and Angel One dropped around 6% each, while CDSL fell over 2%. The combined erosion in market capitalisation was nearly Rs 12,000 regulatory action targeted Jane Street and its affiliates for manipulating prices in Bank Nifty index options and underlying stocks, resulting in an order to disgorge unlawful gains of Rs 4,844 the market's reaction to Nuvama highlights how regulatory action against one entity can impact its business partners—even when they face no direct allegations. The sharp fall in Nuvama's stock reflects investor concerns about potential revenue loss from the possible exit of a significant client, regardless of the firm's conduct."Prop trading firms like Jane Street account for nearly 50% of options trading volumes," noted Zerodha founder Nithin Kamath, highlighting the market's concentration risk. "If they pull back—which seems likely—retail activity (around 35%) could take a hit too. So this could be bad news for both exchanges and brokers."Also Read | Explained: What is Jane Street and how it made Rs 36,500 crore profit by gaming Dalal Street The scale of the market's dependence on proprietary trading firms becomes evident through the numbers. When a single entity controls half of the options volume, its potential exit creates significant uncertainty about future market liquidity and trading activity."Jane Street is one of the largest traders contributing to Indian markets," said Siddarth Bhamre, Head of Institutional Research at Asit C. Mehta . "When big players are banned for wrongdoing, others become cautious and reduce activity, leading to lower volumes. Traders may also face fewer counterparties, potentially causing a further drop in F&O volumes ahead."The concerns extend beyond immediate volume impacts. Ashish Nanda, President & Chief Digital Business Officer at Kotak Securities, outlined the broader implications: "HFTs will surely be feeling the heat. Many will be re-assessing their strategies. Will they slow down? The fact is that HFT firms provide a lot of liquidity in the markets. If there's a reduction in activity by HFTs, it will also impact retail volumes."The immediate market reaction suggests traders are already pricing in a potential decline in volumes across Indian capital markets. Analysts warn that the regulatory action could put pressure on the revenue of intermediaries heavily dependent on derivatives trading, with volumes likely to shrink in response to Sebi's measures against one of the segment's largest prop trading One founder Dinesh Thakkar offered a more optimistic view, arguing that India's market opportunity remains "structural, not cyclical—and certainly not dependent on any one firm." He pointed to the surge in retail participation in equity derivatives—from just 2% in 2018 to over 40% in 2025—as evidence of strong underlying market fundamentals."When one player exits, others step in—and often, very fast," Thakkar noted, referencing global trading giants like Citadel Securities, IMC Trading, Optiver, Jump Trading, and Millennium, which are already expanding into India, setting up local entities, hiring talent, and investing in this optimism, the immediate challenge is gauging the actual impact on trading volumes. Zerodha's Nithin Kamath acknowledged the uncertainty: "The next few days will be telling. F&O volumes might reveal just how reliant we are on these prop giants."The Jane Street episode underscores how regulatory action—while targeting specific misconduct—can have broader ripple effects across the derivatives ecosystem. The Rs 12,000 crore selloff on Friday reflects investor concerns over volume contraction and revenue pressure, particularly for intermediaries with direct exposure to the banned the market adjusts to this new reality, attention will turn to whether other international trading firms can fill the liquidity vacuum left by Jane Street's exit—and how domestic players recalibrate their models to sustain revenue in a changing regulatory Read | Make $1 billion loss in stock futures to earn $5 billion profit in options: Sebi exposes Jane Street's Baazigar strategy
Time of India
2 days ago
- Business
- Time of India
'Marking the close' explained in 5 points: Trick inside Jane Street's alleged manipulation playbook
Jane Street Group LLC, a US-based global proprietary trading powerhouse, which allegedly manipulated the Indian derivatives market, employed a strategy called 'Marking the close' on the Nifty index options. Here is a 5-point explainer on how this strategy works and why it is illegal: 1) Any option contract has an underlying stock, and its premium moves with the price of the underlying stock. For Instance, HDFC Bank's CALL option premium will rise if the stock price of HDFC Bank rises while its PUT option premium will rise with a fall in its price. 2) The logic can be extended to the index options, too. For instance, if the Nifty index moves higher, then the Nifty CALL option premium increases and the same is the case with the Bank Nifty. For index options, the underlying is the index itself, which in turn is a basket of stocks. 3) How Options premiums work Option premiums are calculated based on stock/index's current price vis-a-vis the strike price. Strike price is the price at which you exercise the option. So Premiums are high when they are at-the-money or in-the-money. -- In-the-money (ITM) call option: Current price is higher than strike price -- In-the-money put option - Current price is lower than strike price -- At-the-money (ATM) call/put option: Current price is close to strike price 4) On expiry days, OTM (Out of the Money) options are cheap because they are likely to expire worthless. ATM options are most volatile because they near the strike price and anything can happen. But for ITM options, they are fully loaded and available at a premium. Read More: Sebi may widen Jane Street probe to other indices, exchanges: Report For an options trader, the catch lies in the transition of premiums if he can buy a cheap OTM option for 50 paisa or a rupee and then watch it grow to Rs 10, 20 or even 100 in a matter of a few hours. Traders with deep pockets can make this possible and Jane Street's deep pockets seem to have that kind of money. 5) On the expiry day, you buy all the cheap Index OTM options on one hand and on the other hand, you either buy or sell the index underlying constituents to an extent where the options start to move in your favor. Sophisticated traders can do it by just buying or selling heavyweight stocks of the index. Traders can buy all the cheap options before 3 pm and after that, they can accordingly make orders worth crores of rupees in the heavyweight stocks. It can be done through algorithms which know the exact quantity, price and time, which makes computation of the expiry closing price easy, as the closing price is the weighted average of the last 30 minutes. The algorithms know the closing price which in turn makes your position favourable. Also Read: Jane Street Fallout: Zerodha's Nithin Kamath flags risk to brokers and stock exchanges Why is it illegal? Market regulator Sebi holds this as an unfair, deceptive, and manipulative practice that violates its norms. Sebi's 105-page order holds that Jane Street made unlawful gains through this. Jane Street has refuted these allegations and has said that it will engage with the regulators. ( Disclaimer : Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)
Economic Times
2 days ago
- Business
- Economic Times
'Marking the close' explained in 5 points: Trick inside Jane Street's alleged manipulation playbook
TIL Creatives Jane Street used expiry-day stock moves to shift index options premiums, exploiting algorithmic trades to manipulate prices and gain an unfair edge in Indian markets. Jane Street Group LLC, a US-based global proprietary trading powerhouse, which allegedly manipulated the Indian derivatives market, employed a strategy called 'Marking the close' on the Nifty index options. 1) Any option contract has an underlying stock, and its premium moves with the price of the underlying stock. For Instance, HDFC Bank's CALL option premium will rise if the stock price of HDFC Bank rises while its PUT option premium will rise with a fall in its price. 2) The logic can be extended to the index options, too. For instance, if the Nifty index moves higher, then the Nifty CALL option premium increases and the same is the case with the Bank Nifty. For index options, the underlying is the index itself, which in turn is a basket of stocks. 3) How Options premiums work Option premiums are calculated based on stock/index's current price vis-a-vis the strike price. Strike price is the price at which you exercise the option. So Premiums are high when they are at-the-money or in-the-money. -- In-the-money (ITM) call option: Current price is higher than strike price -- In-the-money put option - Current price is lower than strike price -- At-the-money (ATM) call/put option: Current price is close to strike price 4) On expiry days, OTM (Out of the Money) options are cheap because they are likely to expire worthless. ATM options are most volatile because they near the strike price and anything can happen. But for ITM options, they are fully loaded and available at a premium. Read More: Sebi may widen Jane Street probe to other indices, exchanges: Report For an options trader, the catch lies in the transition of premiums if he can buy a cheap OTM option for 50 paisa or a rupee and then watch it grow to Rs 10, 20 or even 100 in a matter of a few hours. Traders with deep pockets can make this possible and Jane Street's deep pockets seem to have that kind of money. 5) On the expiry day, you buy all the cheap Index OTM options on one hand and on the other hand, you either buy or sell the index underlying constituents to an extent where the options start to move in your favor. Sophisticated traders can do it by just buying or selling heavyweight stocks of the index. Traders can buy all the cheap options before 3 pm and after that, they can accordingly make orders worth crores of rupees in the heavyweight can be done through algorithms which know the exact quantity, price and time, which makes computation of the expiry closing price easy, as the closing price is the weighted average of the last 30 algorithms know the closing price which in turn makes your position favourable. Also Read: Jane Street Fallout: Zerodha's Nithin Kamath flags risk to brokers and stock exchanges Market regulator Sebi holds this as an unfair, deceptive, and manipulative practice that violates its 105-page order holds that Jane Street made unlawful gains through this. Jane Street has refuted these allegations and has said that it will engage with the regulators. (Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)
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Business Standard
2 days ago
- Business
- Business Standard
Retail trading at risk if proprietary giants like Jane St exit: Zerodha CEO
Zerodha founder and CEO Nithin Kamath has cautioned that retail trading activity could be impacted if proprietary trading firms like Jane Street, which contribute nearly 50 per cent of options trading volumes, scale back their participation in the market. This development could have negative implications for both exchanges and brokers, he added. "Prop trading firms like Jane Street account for nearly 50 per cent of options trading volumes. If they pull back which seems likely retail activity (~35 per cent) could take a hit too. So this could be bad news for both exchanges and brokers," Kamath said on X. "The next few days will be telling. F&O volumes might reveal just how reliant we are on these prop giants," he added. In an order released in the early hours of Friday, the market regulator found Jane Street (JS), a New York-based hedge fund, guilty of manipulating the indices by taking bets in the cash, and, futures and options markets simultaneously for making handsome gains. It has barred the hedge fund from accessing the market and impounded over Rs 4,843 crore in gains. The probe has found that JS made a profit of Rs 36,671 crore on a net basis during the probe period from January 2023 - May 2025. Kamath said that if the allegations against Jane Street are true, it's "blatant market manipulation" and despite warnings from the exchange, it continued. "The shocking part? They kept at it even after receiving warnings from the exchanges. Maybe this is what happens when you're used to the lenient U.S. regulatory regime. Think about the structure of U.S. markets: dark pools, payment for order flow, and other loopholes that allow hedge funds to make billions off retail investors. "None of these practices would be allowed in India, thanks to our regulators, You've got to hand it to Sebi for going after Jane Street," he added.
