Did US Firm Jane Street Exploit Loopholes to Manipulate Indian Markets?

The Securities and Exchange Board of India (SEBI), India’s principal securities market regulator, has accused Jane Street, a leading US proprietary trading firm, of orchestrating a massive market manipulation scheme in the Indian derivatives segment.

SEBI’s detailed order alleges that Jane Street systematically exploited regulatory gaps and market structure vulnerabilities to artificially move prices in key indices like Bank Nifty and Nifty 50.

The firm’s Indian subsidiary allegedly executed aggressive buy orders in the morning to push up index levels, then sold off positions later in the day to crash prices, profiting handsomely from options bets placed in advance.

How Jane Street Leveraged Regulatory Loopholes

Jane Street's trading strategy capitalized on variations in the regulation and monitoring of cash equities, futures, and options in India. By coordinating trades across these segments, the firm could amplify price swings and create artificial volatility.

SEBI’s investigation revealed that Jane Street’s entities used “marking the close” tactics, placing large trades near market close to influence settlement prices despite explicit regulatory warnings as early as February 2025.

The firm also used its Indian subsidiary to circumvent restrictions on foreign portfolio investors, allowing it to engage in high-frequency, intraday trading that would otherwise be off-limits.

Did you know?
Jane Street’s alleged manipulation came to light after the firm sued rival Millennium Management in a US court, inadvertently exposing its proprietary India-based options strategy and triggering SEBI’s investigation.

Scale of Profits and Market Impact

Between January 2023 and March 2025, Jane Street reportedly made over $4.4 billion in profits from Indian markets, with a significant portion coming from options trading. SEBI has identified $582 million as “unlawful gains” directly tied to manipulative trades and has frozen the firm’s accounts.

The regulator’s probe found that Jane Street’s actions contributed to increased volatility and losses for retail investors, with as many as 93% of retail F&O traders losing money during the affected periods.

Regulatory Response and Industry Fallout

SEBI’s response has been swift and severe: Jane Street and its affiliates are now barred from buying, selling, or dealing in Indian securities, directly or indirectly. The regulator has also ordered banks to freeze all related accounts and is monitoring the outstanding positions of the firm until the investigation concludes.

We expect this unprecedented crackdown to reshape the operations of foreign institutional traders in India, potentially leading to tighter surveillance of algorithmic and high-frequency trading strategies.

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Jane Street’s Defense and Next Steps

Jane Street has strongly denied the allegations, calling SEBI’s charges “extremely inflammatory” and asserting that its trades were legitimate arbitrage strategies.

The firm has announced plans to contest the ban and defend its reputation, arguing that SEBI’s findings mischaracterize its market activities.

Industry observers expect a protracted legal battle, with potential implications for how global trading firms engage with emerging markets like India.

The Jane Street case has marked a significant turning point in Indian market regulation, emphasizing the threats posed by sophisticated foreign traders and emphasizing the pressing need for strong oversight.

As SEBI tightens its grip on market surveillance, the outcome of this case will likely define the future of foreign institutional participation in India’s booming derivatives market.