By Samannay Biswas
The Securities and Exchange Board of India (SEBI) has barred US trading firm Jane Street Group and four of its affiliates from participating in Indian securities markets, after uncovering what it called systemic manipulation of expiry-day index levels. According to SEBI鈥檚 detailed 105-page order, the firm booked illegal gains of 鈧4,840 crore through aggressive intra-day strategies targeting over 40 Nifty and Bank Nifty component stocks. The trading strategy, dubbed 鈥淚ntra-day Index Manipulation,鈥 involved heavy buying and selling of stocks and futures contracts in the morning to create false impressions of market momentum. These moves influenced index values and options pricing, allowing the firm to profit from bearish positions on index options that surged in value later in the day. Expiry-Day Engineering: A Pattern of Misleading Trades SEBI鈥檚 investigation focused on 18 expiry-day sessions, 15 of which involved Bank Nifty, and 3 involving Nifty 50. The regulator found that Jane Street employed a pattern of 鈥渟harp, large, and aggressive interventions鈥 across the cash, futures, and options markets, particularly on expiry days when options contracts are settled. Stocks involved included banking heavyweights such as HDFC Bank, ICICI Bank, Axis Bank, SBI, Kotak Mahindra Bank, and PNB, as well as Nifty constituents like Reliance Industries, Infosys, TCS, ITC, L&T, HCL Technologies, and Adani Enterprises. On 17 January 2024, Jane Street allegedly made 鈧735 crore in a single day by artificially lifting Bank Nifty stocks during early trading hours, then reversing its positions to trigger a sharp index fall. This allowed it to profit massively from put options while absorbing minor intraday losses in cash and futures. Manipulation Despite Prior Warnings SEBI revealed that even after issuing a cautionary notice to Jane Street in early 2025, the firm continued its pattern of trades in May 2025. In three expiry sessions, the firm used a slightly different strategy called 鈥淓xtended Marking the Close鈥, again distorting end-of-day index levels to extract options profits. 鈥淛S Group continued with similar trades in disregard of the caution letter from the Exchange鈥 and their own prior commitments,鈥 SEBI noted. The regulator found that other market participants were misled by these artificial price signals, believing the index was stable or recovering, while Jane Street was setting up for sharp reversals. Massive Profits from Options, Losses in Equities From January 2023 to March 2025, Jane Street earned 鈧43,289 crore from index options, while absorbing 鈧7,687 crore in losses from equity cash and futures markets 鈥 a trade-off the firm was willing to accept as options gains outweighed losses. SEBI said Jane Street consistently ran the largest 鈥榗ash-equivalent鈥 risks in India鈥檚 derivatives market on expiry days, often dominating trading volumes and influencing price discovery in a way that undermined market fairness. 鈥淭he intensity and sheer scale of their intervention in the underlying stock and futures markets is what set them apart,鈥 the order stated. Market-wide Implications and Enforcement The regulator has named four Jane Street entities in the order 鈥 JSI Investments Pvt Ltd, JSI2 Investments Pvt Ltd, Jane Street Singapore Pte Ltd, and Jane Street Asia Trading Ltd 鈥 and has directed banks to freeze all debit transactions from their accounts. The crackdown has revived concerns over imbalances in India鈥檚 derivatives markets, where institutional traders wield disproportionate influence. SEBI flagged that retail investors often suffer the most when such large-scale, high-frequency strategies distort expiry-day markets. Market participants say the episode raises critical questions about algorithmic trading, market surveillance, and the adequacy of regulatory oversight.