Jane Street Capital deposits 4,843 Crore in escrow account to comply with SEBI regulations, read all about the scandal involving the American trading firm
In a significant move to comply with Indian market regulator SEBI’s directives, American proprietary trading firm Jane Street has approached the Securities and Exchange Board of India (SEBI) with a request to lift trading restrictions placed on it. This comes after the firm deposited ₹4,843.58 crore in an escrow account, as directed by SEBI following serious allegations of market manipulation.
According to a reports, SEBI has confirmed that the specified amount has been credited to the account with a lien in the regulator’s favour. Jane Street has now formally appealed to SEBI to relax certain conditions laid out in the interim order, stating that it has fulfilled the financial compliance required under the directive. The appeal is currently under review, with SEBI assuring that the matter is being handled in line with due process while maintaining the integrity of the Indian securities market.
Why has SEBI banned Jane Street
This entire controversy erupted after SEBI launched a detailed investigation into the trading behaviour of Jane Street Group in India. The regulator concluded that the firm was not just making high profits, but was actively manipulating the market to its advantage.
According to SEBI’s 105-page interim order, Jane Street had raked in massive profits of ₹43,289 crore through index options trading while intentionally booking losses of around ₹7,208 crore in cash equities and futures trading. The motive? To influence market prices in a way that benefited their positions in the derivatives market.
The key strategy used by Jane Street was called “Intra-Day Index Manipulation”. This tactic involved aggressively buying Nifty Bank stocks and futures in the morning sessions to drive up the index. Later in the day, they would aggressively sell off these same positions to bring the index down, at times close to market closing. This deliberate movement created price fluctuations that favoured their massive options positions, especially near expiry dates.
This kind of trading pattern is known as “marking the close”, a manipulative practice where traders push prices up or down near the end of a trading session to benefit their derivative holdings. SEBI said Jane Street took this to an extreme scale, making it “prima facie manipulative” given the volume and timing of their trades.
How the matter came out
SEBI’s investigation showed that Jane Street operated across different segments, including cash equities, stock futures, index futures, and index options. The company would accept losses in stocks and futures to ensure gains in options.
The manipulation mainly happened on days when index options were about to expire. On these days, Jane Street would build large risk positions and manipulate the underlying index to move in a direction favourable to their options trades.
The firm’s Indian arm, JSI Investments Private Ltd, played a crucial role in this. It was involved in heavy trading of index constituent stocks, with no clear financial rationale except to move the market in Jane Street’s favour. These trades allowed them to mislead other investors, who reacted to the artificial price movements, unaware of the manipulation behind the scenes.
The impact of this strategy was significant. While other traders made decisions based on what they believed were real market movements, Jane Street was quietly pulling the strings to profit from the chaos it created.
How much profit did Jane Street make through this scandal
The SEBI probe revealed that Jane Street made total profits of ₹36,502 crore through this manipulation. Of this, around ₹32,681 crore came through foreign portfolio investors (FPIs) linked to the Jane Street group. The regulator also noted that the profits were “significantly higher than the average quantum of assets held by these FPIs in India,” raising red flags about the size and intent of the trades.
Jane Street’s Indian unit, JSI Investments, appeared to have no purpose other than to facilitate these trades. SEBI observed that their daily trading activities lacked legitimate economic reasoning and seemed purely focused on influencing the Nifty Bank index.
A landmark case in Indian markets
This case is being seen as one of the most significant regulatory actions taken by SEBI against a foreign trading entity, as the Indian retail investors saw substantial losses of Rs 1.05 lakh crore in derivatives trading in FY25, according to recent SEBI data. It now sends a strong message to overseas trading companies looking to manipulate markets in India.
The result of this case may have far-reaching effects on the way SEBI treats foreign portfolio investors, particularly those with high-frequency and large-scale algorithmic trading strategies. As of now, all eyes are on SEBI’s final decision and whether Jane Street will be allowed to resume its trading activities in India.
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