US trading giant Jane Street is reportedly gearing up to challenge a ban imposed by India’s market regulator Sebi (Securities and Exchange Board of India), following allegations of market manipulation. “The US-based firm described Sebi’s accusations as ‘extremely inflammatory’ and maintained that the trading practices under scrutiny were nothing more than ‘basic index arbitrage,’” Reuters reported citing an internal email that Jane Street sent to employees over the weekend.
Jane Street, which has been barred from trading in Indian markets and had $567 million of its funds frozen, said it was ‘beyond disappointed’ by the regulator’s order and is preparing a formal response. However, the firm has not yet disclosed the exact legal or procedural steps it plans to take.
Sebi issued an interim order on Friday, alleging that Jane Street engaged in manipulative trades in the Bank Nifty and Nifty by artificially propping up index values during morning sessions and simultaneously taking large short positions in options that later expired profitably. The regulator claims this created an illusion of price strength while setting up trades to benefit from an expected decline.
Jane Street, however, argued that its trades were consistent with global arbitrage practices. “Arbitrage trades are a core and commonplace mechanism of financial markets that keep prices of related instruments in line,” Reuters reported the firm saying in its note to employees, pushing back against Sebi’s allegations that these activities were manipulative.
The firm also reportedly challenged Sebi suggestion that it had failed to cooperate with the investigation. According to the email that Reuters saw, Jane Street executives engaged in multiple meetings with both Sebi officials and exchanges, and had already made adjustments to their trading strategies in response to concerns raised. “Since February, we have made ongoing efforts to communicate with Sebi and have been consistently rebuffed,” Reuters reported Jane Street saying.
For market participants and observers alike, Sebi’s order isn’t just about calling out a single firm but rather signals a broader shift in regulatory intent. The move raises the bar for oversight of high-frequency trading, tighter surveillance of expiry-day activities, and increased transparency from global players operating within India’s derivatives-heavy landscape. While the decision has been welcomed by many traders for its potential to rein in expiry-day volatility, it also introduces a note of caution. For foreign portfolio investors, the message is clear: high-frequency, algorithm-driven strategies, often inaccessible to the average market participant, will now face greater scrutiny.
