SEBI Bars Jane Street from Indian Securities Market amid Manipulation Allegations

On July 3, 2025, the Securities and Exchange Board of India (SEBI) issued an interim order barring U.S.-based trading firm Jane Street Group from participating in India's securities market. The regulator accused the firm of engaging in a "sinister scheme" to manipulate the Bank Nifty index options segment, resulting in alleged unlawful gains of approximately ₹4,843 crore (around $567 million).

SEBI's investigation revealed that between January 2023 and March 2025, Jane Street entities earned a total profit of ₹36,502 crore in Indian markets, with ₹43,289 crore derived from index options trading alone. The firm reported losses in other segments, including index futures, stock futures, and the cash segment. This unusual concentration of gains from a single segment raised red flags, prompting a deeper probe.

The regulator accused Jane Street of executing a "sinister scheme" by engaging in large-scale purchases of Bank Nifty futures and equities during morning sessions, coupled with aggressive selling of Bank Nifty options. Later in the day, the firm allegedly reversed these trades, leading to artificial price movements that benefited their options positions. On January 17, 2024, a weekly Bank Nifty expiry day, the total traded turnover in the cash market for the 12 Bank Nifty constituent stocks was ₹29,225 crore. In comparison, their futures saw ₹43,589 crore in turnover, and Bank Nifty index futures added another ₹32,607 crore. However, the Bank Nifty options market posted a staggering ₹1,03,17,127 crore in cash-equivalent turnover—353 times the cash market and 98 times the combined cash and futures markets. That same day, 752 unique entities traded in the cash market, 26,593 in Bank Nifty futures, but an astronomical 16.15 lakh entities traded Bank Nifty options.

As a result of these findings, SEBI has barred Jane Street from accessing the Indian securities market and directed the firm to deposit alleged illegal gains of approximately ₹4,843 crore into an escrow account. The regulator's interim order also requires Jane Street to open an escrow account in a scheduled commercial bank in India, where the alleged unlawful gains must be deposited.

Jane Street has denied any wrongdoing, asserting that their trading strategies were standard arbitrage practices and expressing intent to contest SEBI's findings. In an internal email to staff, the firm stated that arbitrage trades are "a core and commonplace mechanism of financial markets that keeps the prices of related instruments in line." Jane Street also took issue with SEBI's claims that it had failed to respond adequately to the regulator's concerns, stating that the firm's executives had met with regulators and exchange officials multiple times.

The ban on Jane Street has raised concerns about liquidity in the Indian derivatives market. Traders worry that the exit of a major expiry-day player could shrink market depth and raise volatility. Despite recent volatility, the technical outlook for both Nifty 50 and Bank Nifty remains constructive, though with important caveats.

This case highlights the challenges regulators face in overseeing high-frequency trading and the potential impact of such activities on market integrity. As the situation develops, market participants will be closely watching the legal proceedings and any further actions taken by SEBI to ensure fair and transparent trading practices in India's financial markets.