Business

IIE DIGITAL DESK : MUMBAI, July 5, 2025 — The Securities and Exchange Board of India (SEBI) has barred U.S.-based proprietary trading giant Jane Street from the Indian securities market after exposing a sophisticated, multi-step manipulation scheme. Central to the crackdown is the revelation that the firm posted a staggering ₹734.93 crore (~$86 million) profit in just one day — January 17, 2024, according to SEBI’s interim order.

SEBI’s investigation, which spans trades from January 2023 to March 2025, outlines a meticulously executed “intra-day index manipulation” strategy — nicknamed the “Baazigar Strategy” by market watchers.

On January 17, Jane Street aggressively bought constituent stocks and futures of the Bank Nifty index, amassing roughly ₹4,370 crore in positions. Over a brief eight-minute burst, it became the dominant buyer for major banking stocks, propelling the index up by over 600 points. This artificial uplift misled other traders, who assumed genuine bullish sentiment .

While circulating this artificial bullish momentum, Jane Street was simultaneously taking massive short positions in index options — predominantly puts — worth around ₹32,115 crore . Later that same day, it offloaded its long positions, triggering a sharp decline in prices. This fall boosted the value of its short-option bets, generating the massive one-day net profit of ₹735 crore — despite absorbing a ₹61.6 crore loss in cash and futures .

This was not an isolated incident. SEBI identified 18 separate sessions where Jane Street deployed similar tactics — 15 on Bank Nifty expiry days and three on Nifty expiry days — using both intra-day spikes and end-of-day “marking-the-close” strategies .Over the full two-year period, the firm reportedly delivered ₹36,502 crore in total profits from Indian markets, including a massive ₹43,289 crore gain from indices and stock options alone — figures that far outstripped losses incurred in underlying cash and futures plays.

SEBI’s action against Jane Street includes an asset freeze—ordering the disgorgement of ₹4,843.57 crore (about $567 million) of what it terms "illicit gains"—while barring the firm and its subsidiaries from all market participation until the conclusion of its probe .

The enforcement represents SEBI’s most aggressive action against a foreign trading entity to date .The regulator has instructed banks to limit Jane Street’s access to funds, placed assets into escrow, and forbidden market dealings by any entities affiliated with the firm. Jane Street is contesting the allegations and has been given 21 days to respond or file an appeal through India’s Securities Appellate Tribunal .

Market sentiment has remained relatively stable, with analysts noting that although prop trading firms like Jane Street supplied about 50% of options volume, SEBI’s simultaneous tightening of position rules and surveillance should limit disruption .Still, experts caution that investor confidence could be shaken, especially among smaller retail participants who are often blindsided by such large-scale algos 

SEBI isn’t stopping here. Notices have been issued to Jane Street’s Singapore, Hong Kong, and Indian affiliates. The probe may expand to include manipulation across other index and stock markets . Controllers are also tightening expiry cycle rules — increasing lot sizes and limiting intraday positions — to reduce the scope for replicating such manipulation by other well-funded trading firms .

For Jane Street, whose Asia revenues comprised only about 14% of its $20.5 billion global trading revenue for 2024, the hit is significant in India but not catastrophic. The firm has expressed its intention to engage constructively with regulators and is preparing defenses against SEBI's interim findings .

SEBI’s detailed expose of Jane Street’s orchestrated buying and selling in cash, futures, and options markets reveals a playbook that many market participants had suspected but never seen documented at such scale. With billions at stake, this case marks a turning point in India’s drive to enhance oversight of high-frequency, institutional trading — and to protect retail investors in one of the world’s largest derivatives markets.