By John Meyer, consultant in financial affairs – Eurasia Business News, July 4, 2025. Article no. 1599

India’s market regulator, the Securities and Exchange Board of India (SEBI), has taken strong enforcement action against the New York-based global trading firm Jane Street, barring it from accessing Indian securities markets and freezing approximately Rs 4,840 crore (about $567 million) in alleged unlawful gains. SEBI’s investigation found that Jane Street engaged in systematic market manipulation in the Indian derivatives market, particularly involving Nifty and Bank Nifty futures and options.

The core of the alleged manipulation was a high-frequency trading strategy known as mirror trading or intra-day index manipulation. Jane Street entities reportedly placed simultaneous buy and sell orders at identical prices and times within their own group, reversing trades within seconds. These trades did not serve typical market functions like hedging or liquidity provision but were designed to artificially influence or stabilize market prices without real exposure.

The manipulation was especially evident during monthly and weekly expiry sessions—critical moments for settling derivative contracts. Jane Street allegedly placed large buy orders in the morning to artificially inflate the Bank Nifty index, then built large short positions in index options (buying puts and selling calls). Later in the day, they aggressively sold those stocks and futures to push the index down, profiting from the price movements aligned with their options positions. This method, sometimes called “marking-the-close”, distorted closing prices to benefit their derivatives trades.

SEBI’s probe revealed that Jane Street made net profits of Rs 36,502 crore from Indian markets between January 2023 and March 2025, with Rs 43,289 crore coming from index options. Despite incurring losses of Rs 7,687 crore in stock futures and equities, the overall strategy yielded massive gains through options trading. SEBI described the trading pattern as “prima facie fraudulent and manipulative,” violating India’s capital market regulations.

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The crackdown is one of the most significant regulatory actions against an international trading firm in India’s financial markets. SEBI’s interim order bars Jane Street and its Indian affiliates from trading and orders the impounding of alleged unlawful gains. The case highlights challenges in regulating sophisticated high-frequency trading strategies and protecting market integrity.

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In response, industry voices like Zerodha founder Nithin Kamath have praised SEBI’s decisive action but warned that the Indian market’s reliance on proprietary trading volumes may face adjustments due to this crackdown. Jane Street disputes the findings, maintaining that their trading was legitimate, but SEBI’s probe and order mark a major regulatory intervention in India’s derivatives market.

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© Copyright 2025 – Eurasia Business News. Article no. 1599.