The Securities and Exchange Board of India (SEBI) has barred Jane Street Group entities from accessing the Indian securities market, triggering concerns and discussions about the Indian stock market's structural issues. Simultaneously, Uday Kotak, a veteran in the banking and finance sector, has highlighted three significant concerns plaguing the Indian stock market.

SEBI's Action Against Jane Street

SEBI's order restricts Jane Street Group entities from buying, selling, or dealing in securities, directly or indirectly, within the Indian market. This action extends to all Jane Street Group entities operating in India. The regulator has also directed the impounding of ₹4,843.57 crore from the group, citing alleged unlawful gains. According to SEBI, Jane Street earned ₹36,502 crore in profits through trading in index options on Indian exchanges between January 1, 2023, and March 31, 2025. The market regulator initiated this enforcement action based on suspicions of stock index manipulation.

SEBI has instructed banks to restrict all debit transactions in accounts held by Jane Street entities, unless it's to comply with the order. Credit transactions and debit amounts exceeding the impounded sum may be allowed. Jane Street is required to deposit the amount into an escrow account with a scheduled commercial bank in India, with a lien marked in favor of SEBI. Funds can't be released without SEBI's approval. The prohibition is immediate and will remain in effect until further notice from SEBI. Jane Street has disputed the findings and intends to engage further with the regulator. The group has been given 21 days to respond to the circular.

Uday Kotak's Concerns About the Indian Stock Market

In light of SEBI's action against Jane Street, Uday Kotak has highlighted three structural concerns within the Indian stock market:

1. Growing Influence of Money Power: Kotak cautioned against the increasing dominance of money power in the stock market.
2. Liquidity Disparity: He pointed out the widening gap between single-stock and index derivatives liquidity.
3. Volume-Driven Business Models: Kotak raised concerns about business models that prioritize volumes over fundamentals. He suggests this can be detrimental to long-term market health.

Kotak has also previously raised concerns about the increasing role of Foreign Institutional Investors (FIIs) in India's stock market. He noted that FIIs are benefiting from investments made by domestic retail investors. Rising stock valuations in India have led to increased foreign investor pullouts, while retail investors continue to pour money into equities. Kotak expressed apprehension that this dynamic allows FIIs to book profits and move their money to other global markets.

Potential Market Impact and Future Regulations

Experts believe SEBI's order could reshape the derivatives market and lead to a re-evaluation of its regulations. SEBI may introduce stricter position limits to curb excessive control by single entities or implement real-time monitoring systems to detect manipulative patterns. Tighter margin requirements could be enforced to discourage high-frequency, speculative trading that distorts prices. Enhanced disclosures for proprietary trading firms might also be mandated to ensure transparency and reduce the risk of artificial price movements.