Context and Overview

On 3 July 2025, India’s securities market regulator the Securities and Exchange Board of India (SEBI) took the remarkable step of temporarily barring U.S.-based quantitative trading giant Jane Street from trading in Indian securities and derivative markets. Alongside this ban, SEBI ordered the freezing of approximately ₹4,843 crore (US$567 million) across Jane Street’s Indian accounts. This move, among the most stringent ever against a global trading firm, marks a pivotal moment for cross-border algorithmic trading in India. SEBI’s 105-page interim directive accuses Jane Street of breaching the Prohibition of Fraudulent and Unfair Trade Practices (PFUTP) act by engaging in manipulative trading strategies around weekly index option expiries . Trading was suspended until the frozen funds were placed in escrow and both Jane Street responded and a final order was issued.

Jane Street : About the Company and SEBI’s Order

Founded in 2000, Jane Street is an international quantitative trading and market-making firm headquartered in New York. With more than 3,000 employees globally and annual revenues exceeding USD 20 billion, it deploys sophisticated algorithms and high-speed systems across equities, fixed income, ETFs, and derivatives markets. Jane Street entered India in December 2020, establishing local entities domestically and via affiliates in Singapore and Hong Kong. Between January 2023 and March 2025, SEBI alleges, the firm generated net profits of ₹36,502 crore (US$4.3 billion) trading in index options sparked by intricate intra-day strategies on the Bank Nifty index. Known for its deep risk management culture and functional organizational structure, Jane Street is at the forefront of global quantitative trading.

On July 3, 2025, SEBI issued an interim order that carries several consequential rulings:

• Market Access Ban: Jane Street and its Indian entities have been prohibited from trading in the Indian securities and derivatives markets until further notice.

• Asset Freeze: An immediate freeze on approximately ₹4,843 crore has been mandated; Indian banks must hold these funds in escrow, disallowing any withdrawals without SEBI approval.

• Timeline for Response: Jane Street has 21 days to respond to the order; failing that, they may appeal to the Securities Appellate Tribunal (SAT).

• Grounds for Action: SEBI’s order accuses Jane Street of fraudulent conduct under Section 12A of the SEBI Act, including “egregious manipulation” of cash and futures markets to profit on index options.

This high-stakes intervention underscores SEBI’s sharpened focus on algorithmic trading behavior and its willingness to take decisive action to protect market integrity. SEBI’s move mirrors similar global enforcement trends like Spoofing and layering fines in U.S. markets , Co-location trading scandals in Europe and U.K. Stricter position and order-level controls under MiFID II in Europe.

The Alleged Strategy of Jane Street

SEBI’s analysis highlights a repeatable pattern in Jane Street’s trading behavior around weekly index option expiry days:

1. Morning Inflations On expiry day mornings, Jane Street allegedly bought massive volumes of cash and index futures contracts. These orders moved the Bank Nifty index higher, effectively influencing the underlying index level.

2. Option Positioning Simultaneously, the firm held significant short positions in index options (selling calls or buying puts). The morning push elevated option strikes, increasing their value.

3. Late-Day Repositioning As liquidity thinned later in the day, Jane Street purportedly released the earlier bullish pressure, allowing the index to drift down. This enabled them to square off their derivative positions profitably.

4. Repeating the PatternSEBI alleges that Jane Street executed this aggressive strategy repeatedly over multiple expiry dates throughout the investigation period leading to rapturously high profits and retail losses.

This “Intra-day Index Manipulation” and “Extended Marking the Close” routine reportedly unfolded over 18 expiry days between January 2023 and May 2025 . SEBI argues that this sequence violated PFUTP regulations and, in effect, manipulated index price formation to the detriment of retail investors.

The numbers behind the allegations are staggering:

• ₹36,502 crore in net profits from January 2023 to March 2025.

• ₹43,289 crore net gains from index options alone, offset by losses in other market segments.

• On a standout expiry day January 17, 2024 Jane Street allegedly transacted through ₹4,370 crore of cash and futures trades while holding index option positions worth over 7 times that amount.

In a typical expiry week, Indian retail option traders experienced over 90% loss rates, attributed by SEBI to Jane Street’s strategy. This alleged manipulation, spread across many expiry cycles, raised serious red flags within India's regulatory and trading communities.

Market and Institutional Impact of the SEBI’s Order

The removal of Jane Street triggered sharp sell-offs among key consolidation firms linked to high-frequency trading and derivatives. Shares in Angel One, BSE, CDSL, and Nuvama Wealth fell between 3.5% and 9% on the day of the ban. The decline reflected investor concern that reduced algorithmic activity could squeeze revenue. However, the broader market indices Sensex and Nifty largely shrugged off the news, ending the session relatively flat, indicating confidence that this remains a contained event .

Brokerages dependent on F & O, especially discount platforms felt direct revenue pressure. According to analysis by RBI and industry sources, derivatives volume fell 38% after earlier SEBI rule changes, trimming broker revenues significantly: Q1 2025 saw major firms report revenue declines of 16–35% and EBITDA drops up to 50%. Nifty and Sensex remained mostly stable, but transaction-fee-based earnings for brokers were structurally impacted.

( Script : Nuvama , - 11.19% ( Tradingview , 04/07/2025 )

( Script : AngelOne , - 5.92% ( Tradingview , 04/07/2025 )

( Script : BSE , - 6.56% ( Tradingview , 04/07/2025 , 2 PM)

A pronounced drop followed in the derivatives segment: turnover in index options dropped roughly 17% on NSE and 13% on BSE shortly after the ban announcement . More broadly, India's exchange-traded derivatives market shrank by 51% in options volume year-over-year in Q1 2025, and the nation’s own derivatives trading fell from 16 billion to 4 billion contracts by March .

While not solely due to Jane Street, the event accelerated an existing liquidation trend caused by broader regulatory reforms.The Jane Street action is a clear signal: algorithmic and institutional firms will now face rigorous scrutiny. Exchanges are likely to roll out real-time trade-pattern detection, expiry-day volume controls, and possibly mandatory algorithmic audits .

In the short run, voluntary market compaction and volatility led to dips in turnover. But once confidence returns, markets are expected to stabilize, guided by strengthened regulation. Over time, market quality may actually improve. Reduced scope for unfair price moves will aid retail engagement and institutional entry, bolstering liquidity and attracting long-term capital.

What does it mean for Indian Markets ?

Going forward, SEBI’s actions may spark sweeping changes: real-time surveillance infrastructure, algorithmic audit mandates, automatic position limits on expiry days, and enhanced transparency for retail traders. These reforms aim to deter exploitative trading, foster long-term integrity and liquidity, and encourage responsible participation from quantitative trading firms . Market participants from retail investors to global algo firms are now called to adapt by upgrading compliance systems and embracing behavioral limits.

This case marks a regulatory watershed, signifying:

• India’s commitment to fairness and integrity, aligning it with more mature global markets.

• A warning to global quant traders : India will not be a lax jurisdiction for high-speed, high-impact strategies.

• A path for positive transformation : driving technological upgrade, surveillance adoption, and trust revitalization within markets.

Conclusion

SEBI’s decisive action against Jane Street establishes a powerful precedent. It reinforces that market fairness outweighs trading complexity, and even global quantitative giants are subject to local rules. As India’s derivatives markets mature under deep volumes and global participation, maintaining trust will require constant vigilance, technological adaptation, and thoughtful regulation.

This episode illustrates that fairness and growth can coexist when regulators are willing to act decisively. Global firms must recalibrate to India’s regulatory environment, and domestic institutions must be prepared to lead in compliance. India's markets are expected to emerge stronger, more robust, transparent, and globally respected as a result.