India’s markets regulator, Sebi, is stepping up surveillance of derivatives trading to curb potential manipulation, its chairman said on Monday, following action against US-based trading firm Jane Street.
“There may not be many more such cases,” said SEBI chairman Tuhin Kanta Pandey, without providing further details.
India is currently the world’s largest equity derivatives market, accounting for nearly 60 percent of the 7.3 billion equity derivatives contracts traded globally in April.
The sharp rise in derivatives trading, fuelled in part by increased retail participation, has already prompted the Securities and Exchange Board of India (Sebi) to introduce curbs, including limiting the number of contract expiries and raising lot sizes to deter excessive speculation.
On Friday, Sebi barred Jane Street from trading in Indian markets and froze $567 million of its funds. The regulator alleged the firm manipulated the Bank Nifty index by purchasing large quantities of its constituent stocks in both the cash and futures segments during morning trade, while simultaneously building significant short positions in index options.
According to Sebi's 105-page interim order, Jane Street later reversed those trades to profit from the options positions.
