Jane Street is accused by India’s securities regulator, SEBI, of allegedly employing its “immense trading, financial and technological prowess” to realise outsized profits in India’s derivatives market.
The detailed interim order from SEBI, covers trading activity from January 2023 to March 2025. It gives a vivid account of how Jane Street exploited the different liquidity profiles and intricate relationship between index options, futures, and underlying stocks.
At the heart SEBI’s allegations is its analysis, and supporting documents, of Jane Street’s trading activity
Its analysis for two specific days, 17 January 2024 and 10 July 2024, indicate the gigantic trading, risk and profits Jane Street’s traders put on, and extracted from, the retail heavy market.
On 17 January 2024. Jane Street opened the day aggressively purchasing shares and futures contracts of the twelve constituent stocks of the BANKNIFTY index.
SEBI says Jane Street bought US$500 million of stocks and futures, and by pushing up the stocks and future prices, inflated the index from its opening at 46,573.95 to a morning high of 47,176.97. SEBI’s granular trade-level analysis indicates that Jane Street’s purchases significantly influenced upward price movement, even as broader market sentiment remained bearish.
Simultaneously, as prices climbed, Jane Street allegedly began taking substantial bearish positions through index options, by selling large amounts of call options and buying put options at prices made advantageous by the artificially inflated index level. By midday, Jane Street’s net delta exposure had shifted to an enormous net short position of US$4.5 billion.
SEBI estimated that on that day, the Indian options market in that banking index to be ninety-eight times larger than the cash market on which settlement prices are nevertheless based.
Alex Gerko, CEO of XTX, a rival electronic market maker, estimated on a post of LinkedIn that a US$200 million imbalance would have a market impact superior to 0.4% on index prices.
Later that same day, Jane Street unwound its early long delta one positions in the index components’ stocks and related futures. After 11:47 AM, the firm sold its morning purchases, rapidly unloading US$618 million worth of accumulated shares and futures, which SEBI says exerted significant downward pressure on the index. The index, responding to this massive sell-off, declined sharply, ending the day near 46,064.45.
By the close Jane Street’ traders were up US$84.5 million on what they say was an index arbitrage.
SEBI’s investigation further highlights that this strategy was not isolated. It identifies 15 days between January 2023 and March 2025, primarily on options expiry days, when Jane Street allegedly repeated variations of this pattern. On these occasions, the firm would first push the index upward or downward through aggressive cash and futures trading, subsequently positioning itself in index options to benefit from reversing market moves, according to the regulator These alleged manoeuvres yielded cumulative index options profits of US$450 million.
Jane Street contends that its trades constituted legitimate arbitrage activities aimed at maintaining market efficiency. However, SEBI strongly contests this claim, asserting that such trading patterns clearly manipulated the market, adversely impacting numerous retail investors.
Famed and successful traders have long debated the boundary between legitimate strategy and market manipulation.
Alex Gerko proposes a litmus test for such market manipulation: “How to tell if your strategy is likely legit Vs something that will result in SEBI sending you a 100-page pdf: imagine reducing all sizes in your strategy by a factor of a 100. If it works better than before (per unit of risk/in terms of margins) then it looks legit. If it stops working altogether after scaling down then question your life choices.”
By this measure many legendary trades of the past, including George Soros’s breaking of the Bank of England could be considered market manipulation.
