BENGALURU- India’s Securities Appellate Tribunal on Tuesday ordered the markets regulator to file a response within three weeks explaining why it cannot disclose additional documents in the Jane Street case.

The tribunal also directed the Securities and Exchange Board of India to pause any personal hearings with the trading firm until the matter is heard again on November 18.

A pause on a personal hearing will delay a confirmatory order from the regulator until after November 18 as the process followed by it mandates a hearing before passing an order.

Last week, Jane Street filed an appeal against the markets regulator, seeking to compel it to release documents the U.S. high-frequency trading firm said were pertinent to rebut allegations of market manipulation.

India’s markets regulator on Tuesday said the investigation and final order on Jane Street could be much wider, adding that it will not release any documents that were not relied on for passing the order.

SEBI said the investigation against Jane Street is at a critical juncture and is on going.

Market regulator Securities and Exchange Board of India (Sebi) has given conditional relief to U.S. trading giant Jane Street, allowing it to access the securities market and carry out trading activities.

The regulator has also directed stock exchanges to closely monitor future dealings and positions of JS Group on an ongoing basis, to ensure that the entities do not indulge in any kind of manipulative activity.

The relief comes after Jane Street created an escrow account for an amount of Rs 4,844 crore against Sebi’s July 3 order in which the regulator had banned the U.S. trading giant for alleged market manipulation.

“…in the matter of index manipulation by Jane Street group dated July 3, 2025 (‘interim order’), upon compliance with the directions in clause 62.1 (creation of escrow account with a lien marked in favor of SEBI, for an amount of Rs 4,843,57,70,168/-), the directions stipulated in clauses 62.2, 62.3, 62.4, 62.5, 62.7, 62.8, and 62.10 of the interim order shall cease to apply,” a Sebi release issued today said.

The global proprietary trading company will also be able to use its bank accounts for debit purposes. In the interim order, Sebi had directed the banks, where Jane Street affiliates are holding bank accounts, to ensure no debits were made, without permission of Sebi.

The order had also restricted the JS Group to not make any debits in respect of assets without the prior approval of Sebi.Sebi has also asked Jane Street entities to cease and desist from directly or indirectly engaging in any fraudulent, manipulative or unfair trade practice. The release said that Jane Street entities have agreed to comply with Sebi directions.

While the firm has received regulatory clearance to re-enter the markets, Reuters quoted a second source as saying that Jane Street has provided an undertaking to Sebi that it will refrain from options trading. The firm also does not plan to trade in the cash segment until it has explained its trading strategies to Sebi.

Jane Street Group LLC has deposited Rs 4,840 crore ($564 million) in an escrow account to comply with an order from India’s securities market regulator, according to people familiar with the matter.

The US trading giant deposited the sum as per the directives of the Securities and Exchange Board of India’s July 3 order, the people said, asking not to be named as the information is private. Jane Street does not immediately intend to resume trading in India’s options market, one of the people said.

SEBI didn’t immediately respond to an email sent outside business hours. Regional executives at Jane Street didn’t reply to emails seeking comment. Moneycontrol had reported the deposit of the sum earlier Monday, citing people it didn’t name.

SEBI, in its order, had temporarily banned the trading giant from accessing the local market over allegations of index manipulation, requiring it to deposit what it termed as “illegal gains” in an escrow account with a local bank. Jane Street has denied the allegations.

Jane Street told staff on July 6 that it strongly rejected the premise and substance of SEBI’s interim order, and that it was preparing a formal response to the regulator and assessing legal options.

Securities and Exchange Board (SEBI) has accused Jane Street, one of Wall Street’s biggest trading firms, of running what it calls “an intentional, well planned, and sinister scheme” to distort the country’s markets. The Financial Times reported the regulator’s findings on Monday. Reuters has not verified this independently.

On Friday, SEBI barred Jane Street from trading in India and ordered it to return over 550 million dollars of what it describes as illegal profit. The ban follows allegations that Jane Street moved Indian bank stocks in ways that triggered large payouts on connected derivatives.

SEBI is enhancing its surveillance to scrutinize manipulation in derivatives trading, its chairman said on Monday.

The SEBI has alleged that Jane Street bought large quantities of constituents in Bank Nifty index in the cash and futures markets to artificially support the index in morning trade, while simultaneously building large short positions in index options.

Jane Street rejects allegations

Jane Street has told staff it will fight the ban. In a memo sent on Sunday to around 3,000 employees, senior management wrote they were “beyond disappointed” by SEBI’s “extremely inflammatory” accusations.

“It’s deeply upsetting to see the firm mischaracterised this way,” said the memo, quoted by the Financial Times. “We take pride in the role we serve in markets around the world, and it’s painful to have our firm’s reputation tarnished by a report based on so many erroneous or unsupported assertions.”

Jane Street vs SEBI

Jane Street’s trouble with SEBI links back to a lawsuit it filed last year against Millennium Management and two former traders who left for the hedge fund. In that case, Jane Street claimed the traders stole a valuable strategy that turned out to centre on Indian options. SEBI’s probe zoomed in on Jane Street’s trades linked to the BANKNIFTY index, which tracks India’s major banking stocks.Regulators are now checking other parts of India’s markets too. Jane Street has argued that the trades flagged by SEBI were nothing more than “basic arbitrage trading”, a normal practice in the business.

Pushback on exchange claims

SEBI’s order also says Jane Street ignored warnings from local stock exchanges. The firm disputes this point strongly. In the same memo to staff, Jane Street said the regulator used “a metric for market impact and trading aggressiveness which seems disconnected from actual market dynamics”.

The memo added that when exchanges first raised concerns, the firm “immediately turned off its trading until we could better understand the exchanges’ concerns” and later changed its approach to meet their “preferences”.

“Once again, we left this process feeling that we had reached an understanding of the concerns and reflected them in modifications to our trading behaviour,” the memo said. “Since February, we have made ongoing efforts to communicate with SEBI and have been consistently rebuffed.”

Jane Street has 21 days to object to SEBI’s order and ask for a hearing. The firm says it is working on a detailed response and plans to fight the ban in full.

In the meantime, India’s regulators say they may widen the investigation into other trades and instruments connected to the firm. Jane Street’s future in one of Asia’s biggest markets now hangs on how this fight plays out.

Sebi’s crackdown on Jane Street has jolted the country’s financial markets, exposing regulatory blind spots and triggering urgent debate over whether the regulator can keep pace with the speed, complexity, and scale of modern derivatives trading. As the dust settles, all eyes are now on the regulator’s next move, and whether it can restore trust in a market where 93% of retail options traders are already losing money.

“This kind of manipulation, if proven true, not only distorts the market but also harms retail investors who trade with trust and limited capital,” Gaurav Goel, Founder and Director at Fynocrat Technologies told The Economic Times. “The damage isn’t just financial—it erodes faith in the system.”

Sebi barred the U.S.-based quant trading firm Jane Street and four affiliates from accessing Indian markets on July 3 and ordered the impounding of Rs 4,840 crore in alleged unlawful gains. The regulator’s 105-page order accused the firm of engineering expiry-day moves in Nifty and Bank Nifty indices to mislead traders and profit from options positions.

Goel outlined several regulatory gaps that need plugging. “Manipulators often trade in both stock and options markets to create fake price moves. Sebi should build systems that track both markets together and raise alerts when something looks suspicious,” he said.

He also called for tighter expiry-day limits, more transparency in foreign portfolio investor (FPI) structures, and faster action on unusual profits. “Fast action means less damage.”

The concerns echo across the market. “Jane Street is one of the largest traders contributing to Indian markets,” said Siddarth Bhamre, head of institutional research at Asit C Mehta. “When big players are banned for wrongdoing, others become cautious and reduce activity, leading to lower volumes.”

How the alleged fraud worked

Sebi’s interim order details how Jane Street, through a coordinated network of four entities, including two FPIs registered in Singapore and Hong Kong, allegedly manipulated index levels on 18 expiry days from January 2023 to March 2025. The firm aggressively bought select index stocks in the morning to push the index up, then reversed those trades while holding bearish options positions that gained as the index fell.

In one striking example on January 17, 2024, the firm allegedly made Rs 735 crore in a single day. Sebi said Jane Street’s morning trades “misled participants in index options markets,” while the reversal later in the day pushed prices down and amplified options profits.

“The findings of an earlier research report by SEBI, which inter alia states that 93% of retail investors made losses when trading in the options market, now gain additional context,” the order said. “Such losses… are reflective of the deep damage that the group has inflicted through their illegal activities.”

Market shakeup and fallout

The ripple effects were immediate. Shares of Nuvama Wealth Management, Jane Street’s local trading partner, plunged 10.6%. BSE fell 6.4%, while CDSL slipped 2%. Retail participation could take a hit too, warns Zerodha founder Nithin Kamath. “Prop trading firms like Jane Street account for almost 50% of options trading volumes. If they pull back… it could also impact retail activity, which makes up about 35%,” Kamath wrote on X.

“The next few days will be telling. F&O volumes might show just how dependent we are on these prop giants,” he added.

Taxman may step in

The fallout may not be limited to Sebi’s domain. Tax authorities are likely to scrutinise Jane Street’s structure under India’s General Anti-Avoidance Rules (GAAR). Most profits were booked in its Singapore FPI arm, taking advantage of treaty-based tax exemptions, while Indian entities allegedly executed intra-day trades that FPIs are not permitted to do.

“Given the interim order’s observation… GAAR could be invoked to reallocate profits to entities subject to Indian tax,” Harshal Bhuta, partner at PR Bhuta & Co, told The Economic Times.

Legal and enforcement questions loom

While the order is based on prima facie findings, legal experts say enforcement may prove tricky. “Enforcement of this order now becomes a challenge. Nobody knows whether that money is still with them or whether it has been deployed in other trades,” said Ravi Hegde, in an interview with ET Now. He pointed out that Sebi’s order allows trading restrictions to be lifted if the impounded amount is paid, a move that raises questions on deterrence.

Hegde also noted that the trades “made no economic sense” on the surface and were likely executed solely to influence index movements, misleading common investors. “Per se, it is a fraud. The definition is very clear,” he said, referring to Sebi’s invocation of the Prevention of Fraudulent and Unfair Trade Practices (FUTP) regulations.

As Sebi widens its probe to other entities and indices, the Jane Street case has become a flashpoint for deeper market reform. With India hosting the world’s largest equity derivatives market, accounting for 60% of global trading volume, the regulator’s next steps may well define the credibility of its surveillance systems in an era of high-speed, cross-border trades.

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of the Economic Times)

Jane Street Group, the U.S.-based quant trading giant barred from Indian markets on Friday, pocketed a staggering Rs 735 crore in a single trading session in January 2024, its most profitable day on Dalal Street, according to explosive findings in a SEBI order released the same day.

The profit was part of a larger Rs 36,502.12 crore that Jane Street earned across segments in India between January 2023 and March 2025. But SEBI’s forensic probe zeroes in on January 17, 2024, when the firm allegedly executed an elaborate “Intra-day Index Manipulation” strategy in the Bank Nifty index and its constituents, leading to a windfall in index options.

A day of engineered volatility

On January 17, 2024, the Bank Nifty index opened sharply lower at 46,573.95, compared to the previous close of 48,125.10. “Media reports claimed that this fall may be attributed to the market’s apparent disappointment with the results announced by HDFC Bank after market close on January 16, 2024,” SEBI noted.

What followed was a two-part strategy that SEBI said helped Jane Street generate a net profit of Rs 734.93 crore in a matter of hours.

In the morning session—“Patch I”—the firm aggressively bought Rs 4,370 crore worth of Bank Nifty constituent stocks and futures, a volume SEBI described as significant in relation to the trading volumes in these markets. The purchases pushed prices upward and misled market participants into believing a recovery was underway.

“At a time when participants in index options markets are misled by the above support for Nifty Bank, JS Group builds effectively Rs 32,114.96 crores of bearish positions in the much more liquid Nifty Bank index options by buying cheap Put options and selling expensive Call options,” the order said.

In the second leg—“Patch II”—Jane Street reversed nearly all of its long positions. “The sales are aggressive, in a manner that pushes down prices in the component stocks and hence the index. JS Group books losses in intraday cash/ futures market trading,” the SEBI order stated.

But the losses in equities were dwarfed by the gains from index options. As the Bank Nifty index fell from the morning highs, the put options soared in value while call options lost steam. “Profits in index options more than compensate for the JS Group’s losses in intraday cash/futures trading,” SEBI said.

A broader pattern

This was not a one-off. SEBI’s investigation found Jane Street used the same “Intra-day Index Manipulation” strategy on 15 of the 18 days it examined in detail. On the other three, the firm deployed a separate “Extended Marking the Close” strategy, which was again seen on three more days in May 2025, after SEBI had already issued a cautionary letter.

Despite a February 2025 warning issued through the National Stock Exchange, “JS Group continued with similar trades, in disregard of the caution letter from the Exchange… and JS Group’s own commitments,” the regulator said.

While the NSE closed its own probe into the matter, SEBI opted for a more aggressive stance. On Friday, it barred Jane Street and four affiliated entities from accessing the Indian securities market and ordered banks to freeze withdrawals from their accounts. The regulator also moved to impound Rs 4,840 crore in alleged illegal gains.

A systemic imbalance

The findings further underline concerns about the structure of India’s derivatives markets, where sophisticated global players deploy algorithmic and high-frequency strategies against a sea of retail options traders. SEBI said Jane Street was “consistently running what appeared to be by far the largest risks in ‘cash equivalent’ terms in F&O particularly on index option expiry days.”

The regulator noted the “intensity and sheer scale” of Jane Street’s interventions in cash and futures markets, adding that the firm “was aware that Nifty Bank was almost certainly likely to fall again by the end of the day, given their intent to aggressively sell back all of their morning purchases (and more).”

Other traders, however, “were unaware of all this, and were hence enticed to deal at a time that the Nifty Bank itself was being artificially and temporarily propped up,” SEBI said.

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of the Economic Times)