Indian regulators barred US securities trading company Jane Street from the local market and seized $567 million of its funds, saying an investigation found it manipulated stock indices through positions taken in derivatives.
In its most stringent action ever against a foreign trading firm in the country, the Securities and Exchange Board of India (SEBI) in an interim order dated July 3 said that Jane Street and its related entities (JS Group) would no longer be able to participate in the domestic securities market.
SEBI also impounded an unprecedented Rs 4,840 billion ($566.71 million) from Jane Street, which it said were the ‘unlawful gains earned’ from the alleged misconduct.
“(JS Group) 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. It said the ban will stay in place until a final order is issued after the completion of investigations.
SEBI has asked Jane Street to deposit the impounded funds in an escrow account and asked its bankers to ensure that no debits are made without the regulator’s permission.
Its action comes at a time when about half a dozen global trading firms, from Citadel Securities and IMC Trading to Millennium and Optiver, are ratcheting up their presence in India’s booming derivatives markets.
India is the world’s largest derivatives market, accounting for nearly 60% of global equity derivative trading volumes of 7.3 billion in April, the Futures Industry Association says.
The regulator impounded an unprecedented $566.71m from Jane Street
Jane Street, in an emailed response, said it disputes the findings of the SEBI interim order and will further engage with the regulator. “Jane Street is committed to operating in compliance with all regulations in the regions we operate around the world,” the firm said.
The regulator’s action is a blow for Jane Street, which started its India operations in December 2020 and, according to SEBI, made a profit of about $4.3 billion for the period between January 2023 and March 2025 on its India trades.
The company can file its reply or any objections to the order within 21 days, SEBI said. It can also challenge the order judicially via the Securities Appellate Tribunal.
Allegations
SEBI, in its 105-page order, alleged that Jane Street and its India-incorporated entities took large derivative positions to manipulate the Bank Nifty index a grouping of 12 financial sector firms and a favourite in the derivative markets.
The investigation tracked Jane Street‘s trading patterns over more than two years and found two key strategies that were designed to manipulate stock indexes, the regulator said.
It said Jane Street and its related entities bought large quantities of constituents in the Bank Nifty index in the cash and futures markets to artificially support the index in morning trade, while simultaneously building large short positions in index options.
Later in the day, they reversed these trades to profit from their options positions, SEBI said.
“By moving the BANKNIFTY index with large and aggressive buying followed then by large and aggressive selling, JS Group was creating a false or misleading appearance of market activity. In the bargain, it was enticing unsuspecting entities trading in BANKNIFTY index options to trade at interim levels that were artificial and temporary,” SEBI said.
The regulator said Jane Street‘s trades revealed a pattern of “highly concentrated activity” in the final hour before market close on expiry days to influence the index settlement price in favour of their large options positions.
SEBI said the trading practices employed by Jane Street represent manipulation under its regulations. The trading patterns amounted to “egregious manipulation of the prices of securities and benchmark indices for their own illegal gains, to the detriment of several lakhs of small market participants,” it said.
SEBI also said that by incorporating entities in India, Jane Street managed to “work around” Indian regulations that prohibit foreign portfolio investors from undertaking intraday positions in the cash market.
Market implications
“Not all foreign players are abusing the market,” said Deven Choksey, managing director at DRChoksey FinServ. “We do not see other foreign investors either unwinding any positions or being nervous because of the SEBI order.”
A source familiar with the regulator’s thinking said the decision to bar Jane Street was announced on a Thursday evening after the derivative cycle expiry for the week to limit any wider impact on the markets.
Also, starting July 1, the regulator has tightened rules for positions being taken in derivatives which would help limit the impact if any, the source said.
Market liquidity is unlikely to be impacted, the source said, declining to be identified as they are not authorised to speak to the media.
An email sent to a SEBI spokesperson was not immediately answered.
Reuters
