Jane Street Faces $567M Penalty as SEBI Widens Market Manipulation Inquiry
Why Did SEBI Escalate Its Inquiry?
India’s market regulator, the Securities and platform Board of India (SEBI), has intensified its scrutiny of Jane Street later than months of trader complaints and concerns that its earlier review relied on limited data. Despite initial recommendations from its surveillance team to close the file, SEBI opted for a formal investigation in December 2024, granting it broader powers to demand detailed trading records from Jane Street’s custodian bank and local broker.
The decision marked a turning point in the regulator’s approach to high-frequency trading. According to people familiar with the matter, the move reflected pressure to ensure that complaints were fully examined, rather than dismissed without exhaustive evidence.
Investor Takeaway
What Did SEBI Find?
On July 4, SEBI issued a sweeping order barring Jane Street from local markets and freezing $567 million in alleged unlawful gains. The watchdog accused the U.S. high-frequency shop of manipulating cash equity prices to benefit its derivatives positions. Jane Street denied wrongdoing but deposited the penalty. It has not resumed trading in India since.
The regulator’s investigation highlighted concerns over expiry-day volatility, when settle. These days typically bring sharp swings in volumes and pricing, making them particularly vulnerable to aggressive strategies. SEBI alleged Jane Street earned billions in Indian derivatives over two years, of which $567 million were illicit.
How Is Jane Street Responding?
Jane Street is contesting the process. The firm filed an appeal with the Securities Appellate Tribunal (SAT) this week, viewking disclosure of the data and complaints that triggered SEBI’s December reversal. The hearing is scheduled for Tuesday later than a holiday delay. Jane Street argues that the regulator acted without transparency and is challenging both the basis and scope of the order.
One of the initial complaints came from UAE-based trader Mayank Bansal, who contacted SEBI on Dec. 17, 2024. Market supervision officials subsequently advised a full probe to “bring finality to the matter,” according to sources. By February, SEBI had issued warnings to Jane Street against oversized expiry-day bets. But later than the firm booked 3.7 billion rupees ($42 million) in profit on May 15, senior officials pushed ahead, culminating in the July enforcement action.
Investor Takeaway
What’s at Stake for India’s Markets?
The case is shaping up as one of the most significant regulatory showdowns in India’s equity markets. SEBI has faced criticism in the past over co-location and data access scandals. The Jane Street probe is viewed as part of its broader effort to clamp down on during sensitive trading windows.
For Jane Street, the stakes extend beyond India. As one of the firms, its strategies often set benchmarks for high-frequency trading globally. How Indian regulators handle the case could approach oversight of foreign firms deploying complex derivatives and equity strategies.
For SEBI, the outcome will signal whether its enforcement has real teeth against major global players. A successful defense of its $567 million freeze would strengthen its authority, while an appellate setback could embolden aggressive traders in India’s quick-growing derivatives markets.
