New Delhi, July 4 -- US trading firm Jane Street defied a warning by Indian regulators and continued to engage in stock market manipulation that helped it to make millions of dollars in "unlawful gains", the Securities and Exchange Board of India said as it banned the company and its affiliates.
Through an interim order issued late Thursday evening, SEBI banned four subsidiaries of one of the largest proprietary trading firms in the world from trading in Indian markets. Interim orders are passed when the regulator sees a need for urgent action.
The capital markets regulator also impounded gains of over Rs 4,843 crore, or about $567 million. The four subsidiaries are JSI Investments Pvt Ltd, JSI2 Investments Pvt Ltd, Jane Street Singapore Pte Ltd and Jane Street Asia Trading Ltd.
In the order, SEBI's whole-time member Ananth Narayan explained why the regulator passed an interim order.
The order noted that the ban comes after the National Stock Exchange (NSE) issued a warning to Jane Street in February this year and after the trading group declared its commitment to adhere to all the regulations.
However, in May, JS Group again resorted to "large and aggressive intervention" in index and constituent markets towards the expiry day closing, "so as to influence and manipulate the index to their illegal advantage", SEBI noted.
"In addition, outside of the examination period on May 15, 2025. JS Group was seen to be indulging prima facie in 'extended marking the close' of the NIFTY50 index, in order to benefit in the significant positions that they were carrying in the NIFTY50 index options market. This was in cynical defiance of the explicit Exchange communication to the JS Group in February 2025, and their own representations made to the Exchange in February 2025."
Narayan wrote in the order that such "egregious behaviour" showed that unlike the vast majority of foreign portfolio investors and other market participants, "JS Group is not a good faith actor that can be, or deserves to be, trusted".
"The integrity of the market, and the faith of millions of small investors and traders, can no longer be held hostage to the machinations of such an untrustworthy actor," he wrote.
Modus operandi
Narayan also explained that this was an unusual case where, prima facie, multiple liquid stocks with high retail participation have been manipulated to make "massive profits" for the four entities.
The order cited trades of the entities over a particular period of 18 days to explain the extent of profits made from such actions. The group entities' strategy was largely to take big positions in the cash and futures segments not because of any economic rationale but to move the options in a particular direction and profit from that. In these 18 days, while the group entities booked losses of Rs 201 crore in their intraday trading in underlying BANKNIFTY constituent cash and futures segments, they booked profits of Rs 4,474 crore in BANKNIFTY index options.
The order stated: "This further buttresses the argument that the demonstrably large and aggressive trading behaviour of JS Group in the BANKNIFTY constituent stocks and futures had little standalone economic rationale, other than to manipulate the prices of securities and benchmarks, to mislead, entice, or cause loss to the participants in the index options markets, so that the JS Group could in turn benefit immensely and illegally from the even larger positions that they were creating or carrying in index options."
The regulator took into consideration the nature of their trades, which were unlike various FPIs that primarily invested in the equity markets and were short-term trading entities concentrating on index options.
The order showed how Jane Street's holdings in the equity segment and its sharp contrast to the group's holdings in government securities, which can serve as margin for options trading, indicated where the focus was.
The average month-end equity holdings of the FPIs in the JS Group, including from amongst the entities, between January 2025 and May 2025 was Rs 311 crore. This was "a fraction of the quantum of enormous bursts of short-term equity-related risk that the JS Group is demonstrated to have taken on expiry days in index options," the order noted.
During the same period, the JS Group's FPIs were instead holding on average Rs 15,325 crore of Indian government securities, which served as necessary and essential cash-equivalent liquid margin for them to trade in F&O markets to the enormous extent that they did.
Published by HT Digital Content Services with permission from VC Circle.