India’s market regulator, the Securities and Exchange Board of India (SEBI), has taken unprecedented action against US-based trading firm Jane Street Group and its affiliates for alleged manipulation in index derivatives trading. The regulator has frozen Rs 4,843 crore in alleged unlawful gains and barred the firm from participating in Indian securities markets. SEBI's interim order, released on July 3, claims that four Jane Street-related entities earned over Rs 36,500 crore in profits from trading index derivatives in India between January 2023 and March 2025.

Jane Street has disputed SEBI’s findings, stating that it remains committed to regulatory compliance and intends to engage with Indian authorities to address the matter.

What Is Jane Street and Why the SEBI Action Matters

Jane Street Group LLC is a global proprietary trading powerhouse, headquartered in New York. Since its inception in 2000, the firm has grown to over 2,600 employees operating in 45 countries, with strong footprints in the US, Europe, and Asia. Known for its dominance in exchange-traded funds (ETFs) and index derivatives, Jane Street is a leading market maker in global equities and fixed income markets.

Its high-frequency and algorithmic trading strategies are typically based on quantitative research and real-time data analysis. However, in this case, SEBI alleges that the firm crossed the line into manipulative trading activity in India’s equity derivatives market, the world’s largest by volume.

How Jane Street Allegedly Manipulated Bank Nifty

SEBI’s interim findings centre around what it called an “intra-day index manipulation strategy.” The regulator alleges that Jane Street entities aggressively bought Bank Nifty component stocks and futures in the morning to inflate prices artificially. These inflated prices influenced options market participants who were unaware of the coordinated strategy.

Later in the trading day, Jane Street allegedly reversed its positions by selling off large quantities of the same securities, thereby depressing the index. This volatility on expiry days created favourable conditions for the firm’s massive options positions, generating substantial profits.

SEBI claims that this strategy involved deliberate use of losses in cash equities and futures segments to engineer market movements that benefited Jane Street’s options trades. The scale of the operation, particularly on expiry days, was described as unprecedented in Indian market history.

The Timeline of the SEBI Investigation

SEBI’s scrutiny began in April 2024 following media reports of a legal dispute involving Jane Street’s proprietary trading strategies. By July, the National Stock Exchange (NSE) was asked to examine Jane Street’s trades for irregularities. After interactions in August and a formal response from Jane Street later that month, the NSE submitted its examination report in November.

In December 2024, SEBI observed unusually large intraday positions being built by Jane Street entities, especially on weekly options expiry days. Officials concluded by February 2025 that the firm’s trading pattern violated SEBI’s Prohibition of Fraudulent and Unfair Trade Practices (PFUTP) regulations. Although NSE issued a cautionary letter, Jane Street reportedly continued its large intraday activities, prompting SEBI’s enforcement action in May 2025.

SEBI’s Findings: Massive Profits and Alleged Strategy

According to SEBI, Jane Street made a total profit of Rs 36,502.12 crore across segments during the investigation period. Of this, Rs 32,681 crore came from Foreign Portfolio Investors (FPIs) linked to the Jane Street Group. The regulator found that while the firm incurred a loss of Rs 7,208 crore in the cash and futures segments, it made an outsized gain of Rs 43,289 crore in options trading—indicating that the losses may have been part of a broader profit-maximising strategy through derivatives manipulation.

SEBI noted that such behaviour was especially concerning given that nine out of 10 Indian retail traders lost money trading in derivatives, even as large foreign players like Jane Street recorded outsized gains. A SEBI study last year showed that retail investors lost Rs 1.8 lakh crore in F&O trading over two years, highlighting growing inequality in outcomes between retail and institutional players.

The Enforcement Order: What SEBI Has Imposed

SEBI’s interim order is among the strictest actions taken against a global trading firm operating in India. It includes an asset freeze of Rs 4,843 crore, which Jane Street must deposit in an escrow account with a lien in SEBI’s favour. The firm and its entities have been completely restrained from accessing the Indian securities market and are prohibited from buying, selling, or dealing in any securities directly or indirectly.

Additionally, all bank, demat, and custodial accounts of Jane Street-related entities have been frozen, with no debits allowed without SEBI’s explicit permission. The firm has also been restricted from transferring or disposing of any assets in India until the impounded amount is secured.

What Happens Next

Jane Street has 21 days to respond to the SEBI order and may request a personal hearing. Until further notice, the ban and restrictions remain in force. Exchanges and custodians have been instructed to closely monitor any activity associated with the firm to prevent recurrence of similar trading behaviour.

The case could have far-reaching implications for global proprietary firms active in Indian markets. SEBI’s strong stance signals increasing scrutiny of algorithmic trading and expiry-day strategies used by foreign institutions. It may also pave the way for stricter regulatory norms for high-frequency and intraday trades in the derivatives segment.