SEBI Bars Jane Street
The Securities and Exchange Board of India (SEBI) recently barred Jane Street, a US-based proprietary trading firm, for manipulative trading in the Indian derivatives market. The firm allegedly used aggressive strategies to sway prices and earn unlawful profits exceeding Rs 32,681 crore. This case marks regulatory challenges in controlling complex trading tactics in India’s fast-growing financial markets.
Background of Jane Street’s Operations
Jane Street is a global proprietary trading firm. It trades using its own capital and not client funds. The firm operates in multiple financial markets worldwide, including India. In India, it was active in both cash and derivatives segments, focusing heavily on index futures like NIFTY and BANKNIFTY.
Manipulative Trading Strategy Identified
SEBI found that Jane Street engaged in marking the close — a tactic where large buy or sell orders are placed near market close to artificially influence closing prices. This manipulation was especially seen during derivatives expiry days when closing prices determine contract settlements. The firm consistently placed orders at or above the last traded price to nudge the market upwards.
How Manipulation Was Executed
Jane Street initially accumulated large positions in BANKNIFTY stocks and futures early in the trading day. Later, it reversed these positions aggressively to influence the index’s movement and maximise profits. The firm also used its Indian subsidiary, JSI Investments Private Limited, to route some trades, circumventing restrictions on foreign portfolio investors in the cash market.
Regulatory Response and Impact
SEBI impounded Rs 4,843.57 crore of alleged unlawful gains and barred Jane Street from securities trading. Despite a formal warning from the National Stock Exchange (NSE) in February 2025, Jane Street continued manipulative trading till May 2025. This disregard for regulatory caution worsened the situation and triggered SEBI’s strict action.
Implications for Proprietary Trading in India
The case raises questions on the oversight of proprietary trading firms in India’s derivatives market. Retail participation in equity derivatives surged from 2% in 2018 to over 40% in 2025, increasing market liquidity and volatility. Experts believe SEBI’s clampdown will strengthen market integrity and governance, but also show the need for more proactive monitoring of sophisticated trading strategies.
About Derivatives and Market Distortion
Derivatives derive value from underlying assets like stocks or indices. Proper market functioning depends on arbitrage mechanisms that align futures prices with underlying assets. Jane Street’s aggressive trades disrupted this balance, pushing futures prices away from their true value and manipulating market outcomes.
Jane Street Group Overview
Founded in 2000 in New York, Jane Street Group is a leading global proprietary trading firm. It employs over 3,000 professionals and operates across five global offices. The firm trades multiple asset classes on more than 200 venues in 45 countries, using high-frequency and algorithmic trading strategies.
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