July 4, 2025 – In a landmark regulatory move, India’s Securities and Exchange Board (SEBI) has barred U.S.-based quantitative trading firm Jane Street Group LLC from accessing the country’s securities market, accusing it of manipulating key stock indices through sophisticated derivatives trading strategies, per Reuters.
The interim order, issued on July 3, also impounds 48.4 billion rupees ($567 million) in alleged unlawful gains, marking the most stringent action ever taken by SEBI against a foreign trading firm.
This development underscores India’s growing scrutiny of high-frequency trading and its impact on retail investors in the world’s largest derivatives market.
SEBI’s 105-page interim order alleges that Jane Street employed manipulative trading practices, particularly in the Nifty 50 and Bank Nifty indices, to generate significant profits at the expense of retail investors.
The regulator claims that between August 2023 and May 2025, Jane Street executed strategies such as “intra-day index manipulation” and “extended marking the close.”
These tactics involved aggressively buying large quantities of banking stocks and futures to artificially inflate index prices in the morning, followed by selling those positions while holding large short positions in index options to capitalize on price movements.
SEBI highlighted a specific instance on January 17, 2024, where Jane Street allegedly purchased 4,370 crore rupees ($512 million) worth of Bank Nifty stocks, netting a profit of 734.93 crore rupees ($86 million) in a single day.
The regulator further accused Jane Street of circumventing Indian regulations by incorporating entities in India, such as JSI Investments Pvt Ltd, to engage in intraday cash market positions, which are prohibited for foreign portfolio investors.
SEBI stated that these practices led to “egregious manipulation of the prices of securities and benchmark indices,” causing significant losses for retail investors.
The order emphasized that Jane Street’s actions persisted despite a formal caution from the National Stock Exchange (NSE) in February 2025 and the firm’s written assurances to comply with regulations.
The Financial Impact
Jane Street, a global leader in quantitative trading with over 3,000 employees across offices in the U.S., Europe, and Asia, has been a significant player in India’s derivatives market since commencing operations in December 2020.
SEBI estimates that the firm generated profits of approximately $4.3 billion from January 2023 to March 2025, with $5 billion in cumulative profits from equity options trading across its four India-linked entities.
Of these, SEBI has isolated 48.4 billion rupees ($567 million) as “unlawful gains,” which have been frozen in an escrow account pending further investigation.
India’s derivatives market, which accounts for nearly 60% of global equity derivative trading volumes with 7.3 billion trades in April 2025, has attracted major global trading firms like Citadel Securities, IMC Trading, Millennium, and Optiver.
However, SEBI’s crackdown on Jane Street reflects broader concerns about the impact of algorithmic trading on market fairness.
A September 2024 SEBI report noted that proprietary traders and foreign portfolio investors earned 610 billion rupees ($7.2 billion) in profits in FY 2024, while retail investors incurred equivalent losses, highlighting an imbalance that regulators are keen to address.
Jane Street has contested SEBI’s findings, stating in an emailed response that it disputes the interim order and is committed to complying with global regulations.
The firm plans to engage further with SEBI and has the option to file objections within 21 days or challenge the order through the Securities Appellate Tribunal.
Despite the ban, analysts suggest that the broader market impact may be limited, as other foreign investors are not showing signs of panic or unwinding positions.
Deven Choksey, managing director at DRChoksey FinServ, noted that SEBI’s action sets a “good example” without broadly disrupting foreign participation in India’s markets.
The announcement, made on a Thursday evening after the weekly derivatives cycle expiry, was strategically timed to minimize market disruption.
However, shares of Indian stockbrokers and market intermediaries, including Angel One (down 6%), BSE (down 6.4%), and Nuvama Wealth Management (down over 9%), Jane Street’s India trading partner, fell on Friday as investors reacted to the news.
Amit Chandra, vice president at HDFC Securities, observed that average premium turnover on the NSE and BSE had already declined by 17% and 13%, respectively, in June 2025, following reports of SEBI’s investigation into Jane Street.
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Broader Regulatory Efforts
SEBI’s action against Jane Street is part of a broader effort to curb speculative trading and protect retail investors in India’s booming derivatives market.
Since 2024, the regulator has implemented measures such as limiting contract expiries, increasing trading lot sizes, and strengthening risk monitoring of equity derivatives.
In June 2025, SEBI conducted search and seizure operations targeting “pump and dump” schemes worth over 3 billion rupees ($35.1 million), signaling a robust approach to market manipulation.
Additionally, the regulator is reviewing environmental, social, and governance (ESG) disclosure requirements for listed firms, reflecting its commitment to sustainable and transparent markets.
The ongoing investigation into Jane Street has now expanded to include other indices and exchanges beyond the Nifty 50 and Bank Nifty, according to a source familiar with the matter.
This development suggests that SEBI is intensifying its scrutiny of algorithmic trading practices across India’s financial ecosystem.
The ban on Jane Street has sparked discussions about the balance between innovation and regulation in India’s financial markets.
Kranthi Bathini, director of equity strategy at WealthMills Securities, emphasized that SEBI’s actions are necessary to protect retail investors from exploitative strategies by sophisticated market participants.
However, some market observers argue that the ban could lead to short-term volatility in options liquidity, as noted in posts on X, where sentiment largely supports SEBI’s move as a win for retail investors.
Analysts expect any market impact to be temporary, given the resilience of India’s derivatives market and steady domestic inflows.
As India navigates its position as a global derivatives hub, SEBI’s decisive action against Jane Street sends a clear message: regulatory oversight will remain stringent to safeguard market integrity and protect the millions of retail investors participating in the world’s largest derivatives market.
The outcome of Jane Street’s response and SEBI’s expanded investigation will likely shape the future of high-frequency trading in India.
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