US trading giant Jane Street has deposited $567 million (over Rs 4,800 crore) in an escrow account, paving the way to resume trading in India after being accused of market manipulation by local authorities.
Earlier this month, the Securities and Exchange Board of India (Sebi) barred Jane Street from buying and selling securities in the Indian market and froze $567 million of its funds. The regulator had said the firm could resume operations only if it deposited an equivalent amount in an escrow account, giving Sebi rights over the funds pending the outcome of its investigation.
In a statement on Monday, Sebi confirmed that the funds had been transferred and said it was reviewing the company's request to lift the trading restrictions.
“The money has been deposited in good faith. The firm continues to contest the order and will submit a formal rebuttal in the coming weeks,” said a source with direct knowledge of the matter.
Jane Street has reportedly told employees that it plans to challenge SEBI’s allegations, which it described as related to “basic index arbitrage trading”.
Even if the trading ban is lifted, the dispute is likely to weigh heavily on Jane Street’s operations in India — the world’s largest derivatives market.
According to a source familiar with the matter, Jane Street does not plan to resume trading in Indian options until the issue is resolved. Options have been the firm's primary focus in India, with its exposure to equity derivatives estimated at five to seven times its exposure to cash equities, said the first source.
Sebi may instruct Indian exchanges to lift the ban later this week, said a third source, adding that the exchanges will be asked to closely monitor the firm’s trades.
Sebi has alleged that Jane Street manipulated the Bank Nifty index by purchasing large volumes of constituent stocks in both the cash and futures markets to support the index during morning trade, while simultaneously building large short positions in index options that were later exercised or allowed to expire.
The regulator, which has tracked the firm's trading for more than two years, is now widening its probe to include other indices and exchanges, a source said earlier.
Shares of BSE rose 3.2 percent on Monday on expectations that lifting the ban could boost market liquidity.
India’s derivatives boom has raised red flags among regulators over retail investor risks. In May, the country accounted for around 60 percent of global equity derivatives trading. Retail traders in India lost an estimated ₹1.06 lakh crore in equity derivatives during the last financial year — a 41 percent increase from the previous year.