The Securities Appellate Tribunal (SAT) in India is currently hearing an appeal filed by Jane Street Group LLC against the Securities and Exchange Board of India (SEBI). The case stems from a July interim order by SEBI accusing the New York-based trading firm of manipulative practices in India's derivatives market, specifically involving the Nifty Bank index.

Jane Street, a prominent high-frequency trading (HFT) firm, has contested SEBI's allegations, arguing that its trading activities were standard index arbitrage and that SEBI has denied them access to crucial documents needed to defend themselves. The firm is seeking a halt to further regulatory action until the appeal is resolved.

The SAT has admitted Jane Street's appeal and has directed SEBI to file its response within three weeks. Jane Street will then have three weeks to file a rejoinder. The next hearing is scheduled for November 18, 2025.

SEBI's Allegations

SEBI's July 3 order barred Jane Street from trading and directed the impounding of ₹4,840 crore (approximately $567 million) as alleged illegal gains. The regulator accused Jane Street of manipulating the Nifty Bank index by buying constituent stocks in both the cash and futures markets to artificially inflate the index. It is alleged that the firm then unwound its positions while holding large short bets in index options, profiting from the price drop they allegedly created. SEBI's action was initiated after receiving complaints from market participants.

Jane Street's Defense

Jane Street has called SEBI's allegations "fundamentally mistaken", asserting that its trades were part of standard index arbitrage activity designed to improve price efficiency. The firm claims that SEBI's own surveillance department and the National Stock Exchange (NSE) had previously reviewed its trading activity and found no evidence of manipulation.

A key point of contention is Jane Street's demand for access to documents, including emails between SEBI and Mayank Bansal, a Dubai-based hedge fund manager who reportedly alerted the regulator to Jane Street's trades in India, as well as communications between SEBI and the NSE. The firm argues that these documents are essential to its defense but have been withheld by SEBI. According to Jane Street, SEBI has stated that the documents were withheld because they were deemed "irrelevant" or were not relied upon in passing the order.

Implications

This case is significant for several reasons. It is a high-stakes battle between a major Wall Street trading firm and the regulator of the world's largest derivatives market. The outcome could influence other global quantitative trading firms operating in India, such as Jump Trading, Citadel Securities, and IMC Trading.

Experts suggest that the Jane Street case may prompt a re-evaluation of derivative market regulations in India. There is growing debate regarding retail access to leveraged or exotic derivatives, with some advocating for stricter frameworks based on financial literacy or minimum thresholds.

The tribunal's decision could set a precedent for how SEBI handles investigations and enforces regulations in the derivatives market. The focus remains on whether an interim stay on the SEBI order will be issued.

The Securities Appellate Tribunal has set the next hearing for November 18, giving time to both parties to file their replies.