India Bans US Firm Jane Street from Securities Trading in Landmark Case

On July 3, 2025, the Securities and Exchange Board of India (SEBI) issued an interim order barring U.S.-based quantitative trading firm Jane Street from participating in India's securities markets. The regulator accused Jane Street of executing a "sinister scheme" to manipulate the BANKNIFTY index, resulting in approximately ₹4,843 crore (about $567 million) in unlawful gains. SEBI has ordered the firm to deposit these gains into an escrow account and has imposed a trading ban until compliance is achieved. Jane Street disputes the allegations and intends to engage further with the regulator.

SEBI's investigation revealed that Jane Street engaged in a strategy involving large-scale purchases of index constituents in the cash and futures markets to artificially inflate the BANKNIFTY index. Simultaneously, the firm took short positions in options, profiting from the manipulated index movements. This strategy allegedly misled retail investors and resulted in significant unlawful gains for Jane Street.

Jane Street, a prominent quantitative trading firm headquartered in the U.S., has been active in India's securities markets since 2020. The firm operates through four entities, including two domestic and two foreign-based in Hong Kong and Singapore. Between January 2023 and March 2025, Jane Street reportedly earned ₹36,502 crore (approximately $4.3 billion) in profit from trading equity options in India.

The investigation was partly triggered by Jane Street’s previous lawsuit against Millennium Management involving India’s options market. Despite a caution letter in February 2025, SEBI alleges that Jane Street continued non-compliant activities through May 15, 2025.

On specific trading days, Jane Street allegedly engaged in aggressive buying of BANKNIFTY constituent stocks and futures in the morning, artificially inflating the index. Simultaneously, the firm built large short positions in index options. Later in the day, Jane Street sold off the stocks and futures, depressing the index and profiting from the short options positions. For instance, on January 17, 2024, this strategy reportedly led to a net gain of over ₹734 crore for the group.

SEBI observed that index options on expiry days attract a disproportionately large number of retail participants. Jane Street's strategy was allegedly designed to exploit this asymmetry, misleading retail investors and compromising market integrity.

During the examination period from January 2023 to March 2025, Jane Street entities earned a total profit of ₹36,502 crore in Indian markets, with ₹43,289 crore coming from index options trading alone. SEBI's interim order requires Jane Street to deposit the alleged unlawful gains of ₹4,843.57 crore into an escrow account. The firm is also prohibited from buying, selling, or otherwise dealing in securities, directly or indirectly, until compliance is achieved.

Jane Street has expressed its disagreement with SEBI's findings and stated its intention to cooperate fully with the regulator. The firm emphasized its commitment to regulatory compliance globally.

The regulatory action led to a sharp decline in shares of several Indian financial intermediaries. Angel One dropped 6%, BSE fell by 6.4%, Central Depository Services (India) lost 3.5%, and Nuvama Wealth Management, Jane Street's local trading partner, plunged by over 9%. Analysts warn that the action could cause short-term instability and reduced trading volumes in the derivatives market, although it is seen as a positive step for enhancing market integrity in the long run.

This is one of the largest regulatory actions SEBI has taken against a foreign trader. The investigation was partly triggered by Jane Street’s previous lawsuit against Millennium Management involving India’s options market. Despite a caution letter in February, SEBI alleges that Jane Street continued non-compliant activities through May 15.

SEBI's decisive action against Jane Street underscores the regulator's commitment to maintaining market integrity and protecting retail investors. The case highlights the complexities of modern trading strategies and the challenges regulators face in monitoring and controlling market manipulation. As the situation unfolds, the financial community will be closely watching the interactions between Jane Street and SEBI, as well as the broader implications for global trading practices in emerging markets.