SEBI Bars Jane Street Over Alleged ₹36,500 Crore Market Manipulation in Derivatives Markets

SEBI’s case against Jane Street is built upon quantitative, trade-level evidence documenting repeated, patterned trading around index expiry days—“Intra-day Index Manipulation” on 15 of 18 examined days in Bank Nifty and a similar “Extended Marking the Close” strategy on the remaining three—during which Jane Street is alleged to have used large cash and futures trades to influence the index in anticipation of options profits. For instance, the January 17, 2024 instance shows a morning purchase of ₹4,370 crore in Bank Nifty constituent stocks/futures followed by a midday Bavarian shift where bearish options positions were used to capitalize on a downward move engineered via sell downs later in the day, netting ₹734.93 crore.

SEBI argues that the cash/futures trades had “no standalone economic rationale”—they were only intended to move benchmark index levels to mislead other market participants and benefit derivative positions. Jane Street disputes this, describing its behavior as legitimate arbitrage, and asserts it sought engagement with SEBI and made modifications—though SEBI maintains similar trades persisted even after warnings.

The enforcement action is large both in scale and precedent: the alleged illegal gains—₹4,840 crore—are the largest such seizure from a foreign firm in India. The ban restrains Jane Street from market access until final adjudication. Jane Street has filed a petition with the Securities Appellate Tribunal, claiming it was denied access to evidence essential to its defence.[news15] This signals a protracted legal process ahead.

Strategically, this case sends a strong signal to other algorithmic and quantitative trading firms operating in India: regulators are closing in on complex derivatives strategies that exploit structural liquidity asymmetries between cash/futures and options segments, especially around expiry. It may prompt more tightening of position limits, transparency requirements, and coordinated regulatory oversight across segments to preserve market integrity and protect retail investors who may be disadvantaged by manipulative behaviors. Open questions remain: what legal standard SEBI will meet for intent; whether similar findings will follow for other indices, firms, or exchanges; and how this will affect market liquidity and risk-taking in India’s derivatives ecosystem.