The Securities and Exchange Board of India (SEBI) has taken decisive action against Jane Street Group, a prominent global proprietary trading firm, barring it from accessing the Indian securities market. The regulator's order, issued on July 3, 2025, cites concerns over alleged market manipulation and unfair trading practices employed by the firm. SEBI has also directed the impounding of ₹4,843 crore in alleged unlawful gains.

SEBI's Allegations and Investigation

SEBI's investigation has accused Jane Street of using high-frequency trading strategies to manipulate the Indian derivatives market. The core allegations revolve around the firm's use of tactics like "mirror trading" and "circular trading" to create artificial trading volumes and influence prices. SEBI alleges that these strategies, particularly in Nifty and Bank Nifty futures and options, were not aimed at hedging risk or providing liquidity but rather at shifting or stabilizing prices without genuine market exposure.

The investigation further revealed that Jane Street allegedly engaged in "intra-day index manipulation" and "extended marking the close" strategies to influence the closing prices of indices, especially on expiry days. This involved aggressive buying and selling of Bank Nifty stocks and futures to artificially inflate or depress prices, thereby benefiting their options holdings.

SEBI's order highlights specific instances of such alleged manipulation. For example, on January 17, 2024, Jane Street reportedly bought Bank Nifty futures worth ₹4,370 crore and sold Bank Nifty options worth ₹32,115 crore in the morning session, followed by selling Bank Nifty futures worth ₹5,372 crore later in the day. Similarly, on July 10, 2024, the firm allegedly created large short positions in Bank Nifty futures and constituent stocks during the final hours of trading to influence index closing.

Impact on Capital Markets

The ban on Jane Street has sent ripples through Indian capital markets. Shares of capital market-related stocks, including BSE and Angel One, experienced a dip following the announcement. Nuvama Wealth Management Ltd., reportedly a local trading partner of Jane Street, saw its shares plunge significantly.

Market experts anticipate that the ban could impact derivatives volumes and volatility in the short term. The move also underscores SEBI's growing vigilance and willingness to assert control over foreign institutional activity in the Indian derivatives market.

Jane Street's Response

Jane Street has disputed SEBI's findings and vowed to engage with the regulator. The firm maintains that it is committed to operating in compliance with all regulations in the regions where it operates. Jane Street has the option to appeal SEBI's decision.

Jane Street's Operations in India

Jane Street has been operating in India since December 2020, with its operations spread across multiple entities, including Jane Street Asia Trading, Jane Street India Trading Pvt Ltd, and Jane Street Asia LLC. SEBI's investigation suggests that these entities acted in concert, executing synchronized trades with coordinated strategies. Between January 2023 and March 2025, Jane Street reportedly earned substantial profits from its India operations, with a significant portion attributed to index options trading. SEBI estimates that the firm earned ₹36,500 crore in profits between January 2023 and March 2025, with ₹43,289 crore coming from index options alone.

Regulatory Actions and Implications

SEBI has directed Jane Street to deposit ₹4,843 crore into an escrow account. The ban restricts Jane Street and its affiliates from participating in the Indian securities market, directly or indirectly, until further notice. Banks have been instructed to freeze debits from Jane Street-linked accounts without SEBI's permission.

This action against Jane Street marks one of the most significant regulatory interventions against a foreign trading entity in India's financial markets. It signals SEBI's commitment to maintaining market integrity and protecting the interests of retail investors. The case also highlights the challenges of regulating high-frequency trading and the potential for market manipulation in the derivatives segment.