The Securities and Exchange Board of India (SEBI) has barred U.S.-based investment firm Jane Street from its securities markets for allegedly manipulating the stock index and unlawfully earning ₹4,843 crore.
JSI Investments, JSI2 Investments, Jane Street Singapore, and Jane Street Asia Trading, all part of the Jane Street Group, manipulated Bank Nifty — the index which has 12 bank stocks — and unlawfully gained a total of ₹4,843.6 crore, according to SEBI.
“JS Group first aggressively bought significant quantities of Bank Nifty underlying constituent stocks and futures, temporarily pushing up or lending considerable support to the Bank Nifty index. In the second patch of the day, as has again been demonstrated by data and analysis, J.S. Group was seen to practically and effectively reverse all of this buying activity from the first patch, by aggressively selling large quantities of Bank Nifty underlying constituent stocks and futures,” SEBI’s whole time member G. Ananth Narayan said in his order on Thursday.
Explaining the modus operandi of the violation in granular detail and backed by data, the capital markets regulator said it found that the Jane Street Group was “aggressively buying ₹4,370.03 crore of Bank Nifty stocks and futures.” This was also a sizeable part of the total transaction of the market. The purchase took place on a day when the index was falling, raising suspicions.
The action escalated the prices of Bank Nifty stocks and effectively the index, SEBI said in the order.
While small investors were misled by this trade, Jane Street built trades of ₹32,114.96 crore of bearish positions in the more-liquid Bank Nifty index options. It bought cheap put options and sold expensive call options, SEBI said.
The group then reversed and sold all future positions that it had taken, booking losses. This aggressive selling pushed prices down. The loss was compensated by the profit Jane Street had booked in the positions it had taken in Bank Nifty index options, the regulator said.
“It appears that the incorporation of the aforesaid company in India enabled the J.S. Group to get around the regulatory prohibition against cash market transactions, which solely applied to FPIs, and thereby execute the manipulative scheme without specifically flouting the FPI regulations,” Mr. Narayan wrote.
SEBI ordered that the group open an escrow account in a scheduled commercial bank to transfer the money unlawfully earned, and directed banks, depositories and other market institutions not to make debits in the accounts of Jane Street without its permission.
The group’s entities have been given 21 days from the receipt of the circular to respond.
Experts say the order will reshape derivatives market and may bring in some relook at there regulations governing them.
“SEBI may introduce stricter position limits to curb excessive control by single entities, as seen in Jane Street’s large-scale trades, or implement real-time monitoring systems to detect manipulative patterns like ‘Intra-day Index Manipulation.’ Tighter margin requirements could be enforced to discourage high-frequency, speculative trading that distorts prices. Additionally, SEBI might mandate enhanced disclosures for proprietary trading firms to ensure transparency in their strategies, reducing the risk of artificial price movements. Circuit breakers or volatility controls could be refined to limit extreme price swings caused by coordinated trades, protecting retail investors from sudden losses. These reforms, prompted by the need to address manipulation that misleads investors and erodes market trust, could increase compliance costs for firms but foster a more stable, equitable derivatives market, prioritising investor confidence and long-term market integrity,” said Sonam Chandwani, managing partner at KS Legal & Associates.
“While some rail guards are needed as regards HFT (High frequency trading) and Algo Trading, one hopes that a nuanced approach continues to be adopted as regards continuing to permit HFT and Algo trading,” said Jayesh H, co-founder of Juris Corp.
Published – July 04, 2025 09:08 pm IST
