Zerodha's Nithin Kamath Warns Jane Street Crackdown Could Be 'Bad News': 'If Allegations Are True...'

Zerodha's Nithin Kamath has lauded the Securities and Exchange Board of India's temporary ban on US-based quantitative trading firm Jane Street from accessing India's securities market, calling it a strong move. If the allegations were revealed to be true, this could prove to be a grim notion for the futures and options trading space in the country, he said.

"You've got to hand it to SEBI for going after Jane Street," the Founder and Chief Executive Officer of Zerodha said in an X post, adding that if the allegations are true, the firm's conduct amounts to "blatant market manipulation."

Kamath flagged potential downside risks of the crackdown. Prop trading firms like Jane Street account for nearly 50% of options trading volumes, he pointed out. "If they pull back—which seems likely—retail activity (around 35%) could take a hit too. So this could be bad news for both exchanges and brokers."

The coming days will be crucial in understanding the broader impact, said the CEO. "F&O volumes might reveal just how reliant we are on these prop giants," he added.

What's particularly shocking, he noted, is that the firm allegedly continued its activities despite receiving warnings from the exchanges.

Kamath pointed to the structural differences between the US and Indian markets, suggesting that regulatory laxity in the US may have enabled such behaviour. "Think about the structure of US markets: dark pools, payment for order flow, and other loopholes that allow hedge funds to make billions off retail investors. None of these practices would be allowed in India, thanks to our regulators," he said.

Markets regulator SEBI alleged that Jane Street and its India incorporated entities took large derivative positions to manipulate the Bank Nifty index.

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 regulator said. It restrained these entities from accessing the securities market and further prohibited them from buying, selling, or otherwise dealing in securities, direct or indirect. The ban will stay in place till a final order on completion of investigations is issued.

SEBI added that it would impound Rs 4,843.57 crore from Jane Street, which were the 'unlawful gains earned' from the alleged misconduct. The market watchdog has asked Jane Street entities to jointly and severally deposit the amount into an escrow account, with a scheduled commercial bank in India.

Jane Street disputes the findings of the SEBI interim order and will further engage with the regulator, it told NDTV Profit on Friday morning.