India’s stock market regulator, the Securities and Exchange Board of India (SEBI), has imposed a temporary ban on New York-based trading giant Jane Street, alleging the firm engaged in a “sinister scheme” to manipulate the country’s derivatives market. The move follows a months-long investigation and represents a significant development in India’s effort to rein in unfair trading practices in its booming financial markets.
According to an interim order published on SEBI’s website and first reported by the Financial Times, Jane Street is accused of deliberately manipulating both cash and futures markets to distort the level of the BANKNIFTY index—an index that tracks Indian bank stocks. SEBI claims this manipulation was designed to mislead retail investors into making trades at unfavourable prices, benefiting Jane Street at their expense.
“JS Group was undertaking an intentional, well planned, and sinister scheme and artifice to manipulate cash & futures markets and hence manipulate the BANKNIFTY index level,” SEBI stated in its order. The regulator added that these actions were intended to “entice small investors to trade at unfavourable and misleading prices.”
SEBI has directed Jane Street to deposit $550 million—allegedly gained illegally—into an escrow account. A source close to the investigation told the Financial Times that the temporary ban could be lifted if the funds are transferred as instructed. However, under Indian law, Jane Street could face a penalty of up to three times the amount.
In response, a spokesperson for Jane Street said the firm “disputes the findings of the SEBI interim order and will further engage with the regulator.” The spokesperson added, “Jane Street is committed to operating in compliance with all regulations in the regions we operate around the world.”
Jane Street, a major foreign player in India’s markets, has generated billions of dollars through options trading in the country. In 2024 alone, the firm’s global trading revenues surpassed $20 billion, with profits rivalling those of Wall Street heavyweights Goldman Sachs and Morgan Stanley.
The investigation gained momentum earlier this year after Jane Street filed a lawsuit in April against hedge fund Millennium Management and two former employees, accusing them of stealing trade secrets related to strategies used in India’s options market. The lawsuit, which was settled in December, prompted SEBI to scrutinize Jane Street’s broader trading activities.
SEBI’s interim order alleges that Jane Street used aggressive trades in the underlying cash and futures markets to manipulate expiry-day prices for index options. This, the regulator claims, enabled the firm to secure outsized profits at the expense of retail investors—a group that SEBI has recently sought to protect by tightening regulations on derivatives trading. According to SEBI, 90% of retail investors lost money in options trades last year, despite India accounting for nearly 89% of global equity options volume in 2024, as reported by the Futures Industry Association.
Despite receiving a cautionary letter from SEBI in February, the regulator stated that Jane Street continued to violate trading norms as recently as May 15. The firm now has 21 days to respond to the interim order and request a formal hearing.
This case marks one of SEBI’s most high-profile actions against a foreign trading firm and reflects its broader crackdown on market manipulation amid rising retail participation and concerns over fairness in India’s rapidly evolving capital markets.
