The Securities and Exchange Board of India (Sebi) has barred US trading firm Jane Street from accessing local securities markets. The move follows an ongoing investigation that the market regulator had initiated into alleged manipulation of the market via positions Jane Street had taken in the equity derivatives market.
In an interim report, the markets regulator has claimed that Jane Street made unlawful gains of over ₹4,843 crore, which shall be impounded.
“Entities are restrained from accessing the securities market and are further prohibited from buying, selling or otherwise dealing in securities, directly or indirectly,” Sebi said in the interim order.
The New York-headquartered Jane Street Group has rapidly emerged as a major Wall Street trader and has expanded in markets around the world.
Bloomberg had previously reported that Jane Street Group generated $20.5 billion in net trading revenue in 2024, exceeding that of banking majors like Citigroup and Bank of America.
Why is Sebi investigating Jane Street in India?
Sebi says it carried out a preliminary examination in April 2024 based on certain media reports referencing a legal dispute involving Jane Street Group for alleged unauthorised use of their proprietary trading strategies in Indian markets.
In July 2024, the National Stock Exchange (NSE) was asked to examine the trading activity of the JS Group to ascertain if there was any market abuse involved. Then, in August, Sebi officials interacted with Jane Street and associated entities (JS Group), which, a few days later, provided written submissions explaining the trades. The NSE examination report was submitted in November.
“Sebi observed what appeared to be abnormally high or low volatility on weekly index options expiry days. Further, Sebi noted that there were certain entities consistently running what appeared to be by far the largest risks in ‘cash equivalent’ terms in F&O (futures and options), particularly on expiry days,” it said.
Following this, a team was set up for a more comprehensive investigation. Officials noted that JS Group appeared to be engaging in activities in violation of Sebi‘s PFUTP (Prohibition of Fraudulent and Unfair Trade Practices) regulations.
The Sebi order notes that profits from index options alone accounted for over ₹43,289.33 crore, whereas losses in stock futures, index futures and cash cumulatively amounted to ₹7,687.21 crore.
As per the regulator’s investigation, JS Group took opposite side positions in index derivatives, where one would buy and another would sell the same contract, especially in Bank Nifty.
There were aggressive cash and futures selling of Bank Nifty components, reversing aggressive purchases, Sebi pointed out.
The interim order
The JS Group entities have been directed to open an escrow account in a scheduled commercial bank in India to deposit jointly and severally the ₹4,843 crore in unlawful gains with a lien marked in favour of Sebi, and the amount kept therein shall not be released without permission from Sebi.
They have also been restrained from accessing the securities market.
“The Entities shall cease and desist from directly or indirectly engaging in any fraudulent, manipulative or unfair trade practice or undertaking any activity, either directly or indirectly, that may be in breach of extant regulations,” it said.
Sebi has directed stock exchanges to closely monitor any future dealings and positions of JS Group on an ongoing basis, to ensure that the entities do not indulge in any kind of manipulative activity, including by dealing in securities using any of the patterns identified in the order, till the completion of the investigation by Sebi.
Banks where the entities have bank accounts will also have to ensure there is no debit without Sebi’s permission.
The regulator said that failing to take immediate action pending further investigation would cause irreparable damage by severely denting confidence in the securities market, allowing the possibility of continued manipulation at the cost of lakhs of traders and investors and rendering post-investigation remedial measures irrelevant.
What Jane Street says
Jane Street has disputed Sebi’s claims.
In an emailed response to Reuters, Jane Street said it would further engage with the regulator and that it was committed to operating in compliance with all regulations in the regions in which it operated.
