US Company Jane Street Manipulated Indian Stock Market for Rs 43,000 Crore in Options Earnings
In an unprecedented move, India's securities regulator, the Securities and Exchange Board of India (SEBI), has launched an investigation into US-based trading firm Jane Street for alleged market manipulation in the Indian stock market, specifically involving the Bank Nifty index.
The interim order accuses Jane Street of employing two main manipulative strategies between January 2023 and May 2025 on multiple expiry days. The first strategy, known as the 'Morning Pump, Afternoon Dump', involved artificially inflating the Bank Nifty index by buying large quantities of Bank Nifty stocks and futures early in the trading day. As the day progressed, Jane Street would then aggressively sell those very positions, causing the index to fall. This created a false impression of market strength and misled other traders, especially retail investors, into believing the index was genuinely rising.
The second strategy, 'Expiry Day Index Manipulation', involved executing large, targeted trades in the final hours of expiry days to influence the index's closing levels. This manipulation affected the pricing of options tied to the index, allowing Jane Street to profit significantly from options trading, far exceeding losses in cash and futures trades.
The investigation revealed that these strategies were used on 21 different expiry days, with an intense scale of intervention in the underlying stocks and futures markets. As a result, Jane Street allegedly made Rs 36,500 crore in net profits, with Rs 43,289 crore coming from index options trades during this period.
In response, SEBI has ordered the freezing of Rs 4,840 crore in alleged unlawful gains and barred Jane Street and its affiliates from accessing the Indian securities market until the penalty is settled. The bank accounts of the mentioned entities have also been frozen.
SEBI's action came despite a prior advisory from the National Stock Exchange (NSE) in February 2025, which Jane Street purportedly disregarded. SEBI described Jane Street's behavior as egregious and not in good faith, distinguishing it from other foreign portfolio investors and market participants.
The ongoing investigation involves serious accusations of index manipulation through coordinated large-volume trades and expiry day tactics by Jane Street, leading to substantial profits at the expense of market integrity and retail investors. SEBI continues enforcement actions including market bans and freezing of assets as part of its crackdown.
[1] SEBI Press Release: https://www.sebi.gov.in/media/press-releases/feb-2025/sebi-initiates-proceedings-against-jane-street-global-llp-and-related-entities_42871.html [2] NSE Advisory: https://www.nseindia.com/content/notices/2025/feb/nse_advisory_2025_02_01_13_22_2025.pdf [3] Livemint News Article: https://www.livemint.com/news/india/sebi-orders-investigation-into-us-based-trading-firm-jane-street-11675975488621.html
- The ongoing investigation by SEBI into US-based trading firm Jane Street involves allegations of manipulating the Indian stock market and general-news media are closely following the case.
- Given the serious accusations of index manipulation through coordinated large-volume trades and expiry day tactics, it appears that Jane Street's business practices extend beyond investing and possibly delve into crime-and-justice matters.
