Jane Street Saga: SEBI Mulls Special Division To Tackle Manipulation By High Frequency Trading Firms

Stock market regulator—Securities and Exchange Board of India—is currently exploring forming a special division that will be responsible for looking into market manipulation instances of high-frequency trading firms, according to people familiar with the matter.

The immediate function of this team would be to look into Jane Street entities and would later expand to any such instances in the future.

The regulator is likely to equip this team to investigate large-scale manipulations by foreign firms operating in major trades in Indian markets, sources said. The development comes in the wake of SEBI’s July 3rd interim order against the Jane Street entities and its expanded scope of investigation before a final order is released.

In April 2024, the regulator acted upon some media reports informing on a legal matter of Jane Street Group. The issue pertained to unfair use of prop trading methods in the Indian stock market.

Thereafter, in July, the National Stock Exchange looked into the issue, and upon an interaction with SEBI in August, the group gave its side of the story. While the proceedings were still brewing up, the Indian markets saw one of the biggest derivatives trading norms rejigs in October.

SEBI issued a circular announcing a series of policy steps in order to address what was seen as overtrading in index options on expiry day.

On Nov. 13, 2024, the NSE examination report on JS Group’s trading activity was submitted, and later, as per the order, the exchange observed what appeared to be abnormally high or low volatility on weekly index options expiry days.

Further, SEBI noted that there were certain entities consistently running what appeared to be by far the largest risks in ‘cash equivalent’ terms in F&O, particularly on expiry days, the order read.

The group was found to have continued with these trading activities despite receiving a cautionary letter from NSE.

SEBI barred Jane Street Group entities on July 3 from accessing the Indian securities market and directed the impounding of Rs 4,843.57 crore in alleged unlawful gains from the group.

According to SEBI’s order, Jane Street earned Rs 43,289.33 crore in profits through trading in index options on Indian exchanges between Jan. 1, 2023, and March 31, 2025.

The market regulator passed the order as part of enforcement action. It applies to all Jane Street Group entities operating in India and restricts their ability to trade or participate in any market-related activity.

"Entities are restrained from accessing the securities market and are further prohibited from buying, selling, or otherwise dealing in securities, direct or indirect," SEBI said in an order.

The regulator asked that Jane Street entities jointly and severally deposit the amount into an escrow account with a scheduled commercial bank in India, which the firm did. Thereafter, the firm was allowed to operate in the Indian markets again.