India Regulator Bans Jane Street, Seizes $570 Million Over Derivatives Manipulation

Indian financial authorities have banned the U.S.-based market-making firm Jane Street from trading in the nation’s financial markets, seizing $570 million in profits.

According to a Wall Street Journal (WSJ) report on November 4, India's Securities and Exchange Board of India (SEBI) concluded that Jane Street manipulated prices in the Indian stock derivatives and cash markets to secure substantial gains.

Regulators accuse Jane Street of deceiving retail investors, luring them into transactions, and earning $4.3 billion in profits between January 2023 and March 2023 through these schemes.

SEBI Highlights Manipulative Patterns

SEBI revealed consistent patterns of high-volume trading and price manipulation, particularly around derivatives expiration dates. For instance, a significant case involved a $67 million transaction on a bank stock index in January 2024. Within 8 minutes, trading volumes surged to four or five times the usual levels, enabling Jane Street to secure significant profits.

As a result, Jane Street faces a temporary ban from Indian securities markets. The firm must challenge SEBI’s ruling or submit an official response within 21 days.

Jane Street Disputes Allegations

Jane Street responded, stating, “We disagree with the regulator’s judgment and plan to engage in further discussions on this matter.” The company maintains, “We strictly comply with regulations across all regions where we operate.”

Founded in 2000 and headquartered in New York City, Jane Street operates in 45 countries and is renowned for its algorithm-driven trading strategies, frequently employing experts in mathematics. Notably, Sam Bankman-Fried, who later founded FTX, began his career at Jane Street.

India's Market Dynamics and SEBI’s Transparency Drive

India has become one of the largest markets for equity derivatives, accounting for about 80% of global daily options trading. Despite the high volume, SEBI has expressed concerns over market transparency, noting that nine out of ten retail investors experience losses in such trades. Measures to ensure fair trading are reportedly underway.

Millennium Lawsuit Tied to SEBI Probe

The investigation originated from a lawsuit filed by Jane Street in April 2024 against rival firm Millennium Management and two former employees, alleging misappropriation of its Indian options trading strategies. The dispute was settled in December.

The repercussions from SEBI’s actions signify an important regulatory move to curb market malpractice as India strives to refine and secure its financial ecosystems.