The Securities and Exchange Board of India (SEBI) is currently investigating Jane Street's derivative trading activities in the Indian market over the past three years. This probe stems from concerns raised by institutional investors, alleging potential market manipulation through the use of sophisticated algorithmic trading strategies.
Jane Street, a global quantitative trading firm and market maker headquartered in New York City, entered the Indian market in March 2020. The firm has since become a significant player in India's rapidly growing equity derivatives market. In 2024, Jane Street reportedly generated over $2.3 billion in net revenue from Indian equity derivatives, a substantial increase from the $1 billion earned in 2023. This surge in revenue has drawn increased scrutiny from regulators and market participants alike. The New York-based trading giant earned over 10% of its record $20.5 billion global trading revenue from India alone in 2024.
The core of SEBI's investigation revolves around allegations that Jane Street employed algorithmic trading techniques that caused artificial price movements in index options, misleading other market participants. Specifically, concerns have been raised about "rapid reversals" in trades, sometimes at prices significantly above or below prevailing market rates. These rapid reversals and induced volatility allowed Jane Street to profit at the expense of other investors, according to complaints from a hedge fund manager.
SEBI's probe extends beyond Jane Street's Indian entity, JSI Investments, to include Jane Street Singapore, which also actively participates in India's futures and options (F&O) markets using similar strategies. Earlier in January 2025, the National Stock Exchange (NSE) initiated its own investigation into Jane Street's derivatives trades, citing "irregular activity." The NSE's investigation focused on the same "rapid reversals" and potential market manipulation concerns. However, the NSE concluded its probe in April 2025, after Jane Street's local trading partner, Nuvama Wealth Management Ltd., provided a response that satisfied the exchange. Nuwama argued that the trades were algorithm-driven, lacking human intervention or malicious intent.
Despite the NSE's closure of its investigation, SEBI launched a fresh investigation following complaints from at least nine institutional investors. These investors alleged that Jane Street's algorithmic strategies triggered sharp reversals in index option prices shortly after the firm took its positions. The market regulator's probe also considers the conflict between trading innovations and market integrity, a growing concern for global market regulators.
The rise of high-frequency trading (HFT) firms like Jane Street in India's derivatives market has coincided with a surge in retail participation. However, a SEBI study in 2024 revealed that over 90% of retail investors in India's derivatives market incurred losses, averaging ₹1.2 lakh per investor. This dynamic has raised concerns about fairness in the trading environment, given that retail investors often lack the sophisticated tools and information access available to institutional players.
SEBI's investigation is not isolated. Regulators worldwide are grappling with the challenges posed by rapid technological advancements in trading and their implications for market fairness and stability. The outcome of SEBI's investigation into Jane Street could set precedents for how India manages the intersection of advanced trading technologies and market integrity.
