Jane Street SEBI India: ₹32,681 Cr Market Manipulation Scandal Explained
What Was Jane Street Doing in India, and Why Did SEBI Bar It?
In a major crackdown on alleged market manipulation, SEBI — India’s capital market regulator — has barred Jane Street, a leading US-based proprietary trading firm, from participating in the Indian securities market. At the center of the controversy lies a massive ₹32,681 crore in profits that SEBI says were made through manipulative trading strategies in the derivatives segment, particularly Nifty and Bank Nifty index futures.
Jane Street: A Global Trading Giant With a Sharp Edge
The Jane Street SEBI India controversy has shaken investor confidence across India’s financial markets. US-based proprietary trading firm Jane Street has been barred by SEBI (Securities and Exchange Board of India) for engaging in manipulative trading practices that reportedly earned the firm ₹32,681 crore in unlawful profits.
At the center of the scandal lies Jane Street’s strategic manipulation of the Indian derivatives market, particularly the NIFTY and BANKNIFTY index futures. SEBI’s investigation has unveiled a sophisticated scheme designed not just for profit—but to artificially influence market prices.
What Is Jane Street?
Founded in 2000 and headquartered in New York, Jane Street Group LLC is a global leader in proprietary trading, specializing in high-frequency and algorithmic strategies. With operations in over 45 countries and more than 3,000 employees, the firm is known for trading across multiple asset classes using its own capital.
In India, Jane Street entered through its FPIs (Foreign Portfolio Investors) and an Indian subsidiary called JSI Investments Pvt. Ltd.. But what seemed like a standard trading operation soon turned into a case study in market manipulation.
How Jane Street Manipulated Indian Markets
According to the Jane Street SEBI India case report, the firm used an aggressive strategy known as “marking the close.” This involves placing large buy or sell orders toward the end of trading hours, particularly around derivatives expiry dates, to influence the closing price of index futures.
Here’s how it worked:
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Step 1: In the morning, Jane Street purchased large quantities of BANKNIFTY futures and constituent stocks. This activity pushed prices upward temporarily.
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Step 2: Near the market close, the firm dumped those positions aggressively, manipulating the final settlement price.
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Step 3: The manipulated closing price affected the settlement value of derivatives contracts, allowing Jane Street to pocket massive profits.
SEBI’s investigation found 21 such instances where this strategy was used to move the index in the firm’s favor. This conduct was classified as “non-neutral trading behavior,” a direct violation of fair market principles.
Using Indian Subsidiary as a Workaround
To avoid detection and bypass trading restrictions applicable to FPIs, Jane Street routed several trades through its Indian arm, JSI Investments Pvt. Ltd. Under Indian law, FPIs are not allowed to perform certain cash market operations such as intraday trading.
Interestingly, JSI’s trades in the cash segment often ended in losses, but they served a purpose — making it look like the firm was following regulations. In reality, the real profits were being booked through the F&O segment by foreign entities under the Jane Street Group.
Massive Profits & Regulatory Action
SEBI revealed that the Jane Street SEBI India strategy resulted in ₹32,681 crore in net profits—an amount far exceeding the average Indian asset holdings of its FPIs between January and May 2025.
Key SEBI Actions:
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Ordered the impounding of ₹4,843.57 crore in alleged unlawful gains.
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Barred Jane Street from trading in Indian securities markets.
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Froze all related transactions pending further investigation.
This regulatory action is one of the most significant crackdowns on a foreign proprietary trading firm in India’s history.
Prior Warning Ignored
The Jane Street SEBI India issue came to light after the National Stock Exchange (NSE) issued a formal warning in February 2025, instructing the firm to avoid high-risk trading behavior in index options.
In response, Jane Street promised to comply. However, in May 2025, the firm resumed manipulative strategies—blatantly ignoring the previous notice. This disregard for regulatory warnings played a major role in the severity of SEBI’s final action.
Why This Matters: Impact on Indian Markets
India’s derivatives market has grown dramatically, with retail participation in equity derivatives rising from just 2% in 2018 to over 40% in 2025. This growth has brought global trading firms like Jane Street to Indian shores, but it also raises concerns about market fairness and oversight.
Market Expert Insight:
“The Jane Street SEBI India case will push for stricter compliance and improved governance,” said Dinesh Thakkar, Chairman of Angel One. “Retail and institutional interest in derivatives is massive, and such events help cleanse the system for long-term growth.”
How Derivatives Work — And Where Jane Street Crossed the Line
Derivatives are contracts that derive value from an underlying asset, like a stock or index. In a healthy market, price gaps between a stock and its derivative are corrected through arbitrage — traders buy the undervalued asset and sell the overvalued one until the prices align.
However, Jane Street’s strategy actively created artificial gaps, especially near expiry, by pushing futures prices using large aggressive trades. This undermined the natural market balance, which SEBI deemed as manipulation.
Final Thoughts
The Jane Street SEBI India scandal is a wake-up call for India’s fast-evolving capital markets. It demonstrates the need for vigilant regulation, especially in the face of complex, high-frequency global strategies.
While Jane Street’s reputation has taken a hit, India’s markets are likely to emerge stronger, with better safeguards in place for retail and institutional investors alike.
Source: SEBI
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