Why Sebi barred US trading giant Jane Street from Indian markets, Here is the story

🧩 What Happened?

On July 3, 2025, the Securities and Exchange Board of India (SEBI) issued an interim order banning the Jane Street Group—including JSI Investments Pvt Ltd, JSI2 Investments Pvt Ltd, Jane Street Singapore Pte Ltd, and Jane Street Asia Trading Ltd—from accessing India’s securities markets reddit.com+15barandbench.com+15moneycontrol.com+15.

The regulator also directed the firm to disgorge ₹4,843.57 crore (approx. US $590 million), claiming these were unlawful gains from index manipulation of Bank Nifty and Nifty 50 derivatives business-standard.com+5barandbench.com+5m.economictimes.com+5.

🔍 SEBI’s Findings: The Manipulation Scheme

1. Pattern of Expiry-Day Moves
   During weekly expiry days, Jane Street reportedly used a two-phase strategy:

   • Morning: Massive purchases of Bank Nifty constituent stocks and futures to inflate the index.

   • Afternoon: Heavy selling to deflate the index, profiting from bearish derivatives positions livemint.com+2reddit.com+2m.economictimes.com+2reddit.com+4barandbench.com+4m.economictimes.com+4.

2. Explosive Profits from Options
   Between January 2023 and March 2025:

   • Generated approx. ₹36,502 crore total profit.

   • Of this, ₹43,289 crore came from index options alone, despite losses in other trading segments—raising red flags reddit.com+15indiatoday.in+15business-standard.com+15moneycontrol.com.

3. Ignored Warnings

   • The NSE flagged these patterns in Feb 2025, advising refraining from such activity.

   • SEBI claimed Jane Street continued trading the same way, including into May 2025 reddit.com+11barandbench.com+11indiatoday.in+11moneycontrol.com+3m.economictimes.com+3livemint.com+3.

4. Scale & Impact

   • On Jan 17, 2024, Jane Street allegedly bought ₹4,370 crore in stocks/futures, while taking short positions worth ₹8,751 crore in options, earning a net single-day profit of ₹734 crore livemint.com+3indiatoday.in+3barandbench.com+3.

   • This large-scale intervention misled retail traders, who form the majority on expiry days barandbench.com+5indiatoday.in+5livemint.com+5.

🚧 SEBI’s Interim Orders

• Trading Ban: All Jane Street entities are barred from buying, selling, or dealing in any securities in India until further notice moneycontrol.com+11barandbench.com+11businesstoday.in+11.

• Asset Freeze: ₹4,843.57 crore seized and placed in escrow; further asset disposal requires SEBI’s approval businesstoday.in+2barandbench.com+2indiatoday.in+2.

• Regulatory Oversight: Indian banks, depositories, and exchanges instructed to block withdrawals and closely monitor all positions m.economictimes.com+2indiatoday.in+2businesstoday.in+2.

• Limits on Open Positions: Jane Street can only close existing derivative positions within three months; no new trades allowed business-standard.com+6barandbench.com+6businesstoday.in+6.

⚖️ Jane Street’s Response

Jane Street disputes SEBI’s findings and has stated it will engage constructively with the regulator. The firm maintains its commitment to global regulatory compliance and promises cooperation barandbench.com+4moneycontrol.com+4businesstoday.in+4.

📌 Why It Matters

• Signal to Global Quant Firms: This is the strongest action SEBI has taken against a foreign quantitative trading firm. Regulators see it as a wake-up call for high-frequency and index-heavy strategies livemint.com+8business-standard.com+8business-standard.com+8.

• Protecting Retail Investors: SEBI highlighted that about 93% of retail F&O traders lost money during FY 22–24—a portion of their losses may be due to such manipulation barandbench.com.

• Strengthening Surveillance: The regulator emphasized improved monitoring on derivatives strategies and promised tighter limits such as delta-based exposure caps .

• International Repercussions: Other foreign trading firms like Citadel, Optiver, and Jump Trading have been warned—this may prompt cautious recalibration of their strategies in India business-standard.com+1indiatoday.in+1.

🔭 The Road Ahead

• A final SEBI order will follow as investigations conclude.

• Jane Street’s cooperation and SEBI’s ongoing scrutiny over derivatives market behavior will shape India’s futures landscape.

• Market sentiments suggest derivative volumes won’t be significantly affected long-term, but the crackdown sends a clear message that manipulation has consequences barandbench.com+3moneycontrol.com+3businesstoday.in+3livemint.com+2financialexpress.com+2indiatoday.in+2business-standard.com.

🧠 Conclusion

SEBI’s intervention marks a pivotal moment in regulating automated and high-stakes derivative trading in India. By banning Jane Street and seizing ₹4,844 crore in suspected illegal profits, SEBI sends a clear signal: market integrity comes first. This case will have lasting implications on how algorithmic and index-manipulating strategies are overseen globally.