Jane Street Under SEBI Lens for Algo Trade Strategies in Nifty, Bank Nifty

Jane Street is now facing increased scrutiny by India's market regulator, Securities and Exchange Board of India (Sebi). The quant trading firm is reportedly under investigation by Sebi over the past three years of derivatives trading, as authorities probe whether Jane Street attempted to manipulate the country’s benchmark stock indices.

As per a report by Reuters, the market watchdog is investigating Jane Street, Jane Street Singapore Pte and JSI Investments, the firm's India unit. Sebi is also studying the companies' algorithmic trading strategies in the NSE Nifty50 index and Nifty Bank, sources cited in the report said.

"The investigation is to establish whether there was a repeated pattern of taking outsized derivatives positions in index constituents, particularly bank stocks, then trade the index in the physical market to profit from its position," the source reportedly said. This comes at a time when the market watchdog has increased its scrutiny in the country's derivates trading space.

India doesn't restrict traders from taking intraday positions in the derivatives space and physical markets. However, certain surveillance systems flag repeated trading patterns involving positions over ₹10 billion ($116.93 million).

As of now, a report is being compiled with the help of the stock exchange, post which the US-based trading firm will receive a regulatory notice asking it to explain its trading activity.

The investigation was triggered by Jane Street’s unusually high profits from its derivatives trades in India. According to sources cited in the report, the figure was nearly five times more than what the second-largest trading firm earned.

Jane Street is known for its high-frequency trading and strong presence in the exchange-traded funds (ETF) market. The firm reported a global net trading revenue of $20.5 billion in 2024, as per Bloomberg data cited in the report. Jane Street’s revenue from its India operations reached ₹200 billion ($2.34 billion) as of December 2024, sources cited in the report said.