Jane Street has informed employees that it intends to challenge a ban imposed by the Securities and Exchange Board of India (Sebi), which has accused the US-based high-frequency trading firm of manipulating domestic markets.
In an internal communication to staff over the weekend, the firm reportedly expressed deep dissatisfaction with Sebi's actions, describing the allegations as highly inflammatory. Jane Street maintained that the trading strategies under scrutiny involved standard index arbitrage techniques, which it described as a fundamental aspect of functioning financial markets.
The firm is said to be preparing a formal response to the ban but has not yet disclosed what legal steps it plans to take.
On Friday, Sebi prohibited Jane Street from trading in Indian securities and froze approximately $567 million of its funds. The regulator alleged that the firm executed large trades in Bank Nifty index constituents—both in cash and futures markets—to artificially support the index in the morning session. At the same time, it reportedly built substantial short positions in index options, which were later exercised or allowed to expire, generating profits.
Sebi, which has monitored Jane Street’s trading behaviour for over two years, is believed to have expanded its investigation to include other indices and exchanges.
India’s derivatives market has witnessed a sharp expansion in recent years, driven by retail investor participation. The country now accounts for around 60 percent of global equity derivatives trading volume, according to data from the Futures Industry Association. However, this growth has raised concerns, as many retail investors have suffered significant losses. Recent figures released on Monday show retail traders lost ₹1.06 lakh-crore in the financial year ended March 2025, a 41 percent increase from the previous year.
Sebi chairman Tuhin Kanta Pandey stated on Monday that the regulator is stepping up surveillance to detect manipulation in derivatives trading. However, he suggested that cases like Jane Street’s may not be common.
According to sources familiar with the matter, Jane Street has been exploring legal representation in India but has yet to appoint a firm. An appeal to the Securities Appellate Tribunal is understood to be a likely next step.
In its internal email, Jane Street is believed to have argued that its arbitrage activity was aimed at maintaining price alignment between related financial instruments—a routine function of liquidity providers. The firm reportedly disagreed with Sebi's preliminary conclusion that the trades amounted to manipulation and criticised the regulator’s claim that Jane Street had not engaged adequately.
The email indicated that firm's executives had held several discussions with Sebi and exchange officials, during which they believed mutual understanding had been reached. Jane Street also suggested that it had adjusted its trading behaviour in line with those conversations. Since February, it claimed to have attempted further engagement with Sebi, but had received no response.
