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Jane Street: SEBI Waited Until the Billionaires Got Hurt

C.P. Chandrasekhar

July brought into the open one more alleged scandal in India’s financial markets. While speculation around the actions that constitute the “scandal” has been rife for some time, the story went viral when India’s market regulator, the Securities and Exchange Board of India (SEBI), decided to investigate and then ban a little known and oddly named foreign financial firm, Jane Street. It turns out that not only is Jane Street a major player in international financial markets but also—going by the likely conservative estimates of SEBI—involved in derivatives trading in Indian markets that allegedly delivered it around $5 billion in profits between January 2023 and March 2025. Charging the firm with manipulating the stock index derivatives market to earn profits of Rs.4,843 crore, SEBI banned it.

From the arcane reporting on and discussion of the “strategy” that Jane Street adopted, what emerges is that the firm managed to profit from operations involving simultaneous acquisition of differing quantities of options linked to market indices like Nifty and underlying stocks, which it traded in ways that yielded profits. To guarantee itself high returns, the firm is alleged to have engaged in and sequenced trades of large magnitude to move market indicators in directions that delivered enormous profits.

The gain for Jane Street, being from futures contracts, involved losses for those who were the counterparties to the options they bought (which gives the holder the right to buy or sell the instrument at a guaranteed price within a specified time frame). If the holder of either is making a gain, the counterparty must be making a loss. SEBI has known for some time now that retail traders or individuals trading in markets were the ones suffering much of the losses in the options segment. In a September 2024 study, SEBI reported that while there had been a 150 per cent increase in retail investor participation in the market for index-linked options, 9 out of 10 individual traders in the Futures and Options (F&O) segment had incurred losses in 2022-23.

However, it appears that it is not the knowledge of these losses suffered by small retail investors that moved SEBI to ban Jane Street. Despite evidence of a surge in retail investor involvement and knowledge of odd and asymmetric trends in the F&O market, SEBI had only been issuing repeated warnings to retail investors to be cautious or just stay out of these markets. But it is when other larger and more significant market players burnt their fingers and started alleging manipulation by some actor in the F&O segment that SEBI started paying serious attention. It realised that Jane Street was the primary driver of the market only when the firm filed a lawsuit in a Manhattan court against Millennium Management. Jane Street alleged that Millennium, which had poached two traders from it, was using a proprietary trading strategy they had stolen from their original employer. In the course of that trial, it was revealed more than a year back that this strategy was one that had been put to profitable use by Jane Street in Indian markets.

Taking a cue from that revelation, larger traders who had suffered losses in the F&O space alerted SEBI. That led to SEBI’s investigation and conclusions. There are two sets of arguments, among others, that SEBI’s charges seem to be based on. The first is the pattern and sequencing of the large trades that Jane Street had been undertaking, which pointed to the firm influencing market movements and benefitting from them. The second is evidence that the firm had been waiting until the final strike date to close its deals to ensure that its manipulation resulted in maximum returns.

As was to be expected, Jane Street has denied the allegations, arguing that it was merely adopting hedging strategies—the very purpose for which the derivatives markets were instituted. The firm is keen on continuing with that strategy in the Indian market. This is evident from its decision to exercise the option of depositing in an escrow account a penalty of Rs.4,843 crore—payable to SEBI if the charges are established—and request that the ban be lifted even while the investigation is ongoing, so it can resume trading. It also possibly hopes to persuade SEBI in the course of the investigation that there was no manipulation involved and that it was pursuing a legitimate trading strategy.

For all its public display of anger, SEBI and Jane Street seem to be on the same page. The market regulator has said it does not want to ban index futures and will only seek to regulate them better to prevent disruption by rogue players. What this implies is that SEBI’s problem with Jane Street is that it was “rogue” and not just exploiting opportunities for profit that a liberalised market offers. This also suggests that cosmetic regulation of trading volumes or exposures, as opposed to doing away with the instruments concerned and keeping out players with deep pockets who could move markets, is all that SEBI wants to resort to.

This ignores the larger issue of why, if at all, such instruments are needed. They do not contribute to mobilising funds for actual physical investments, nor do they help smaller players use them to hedge against risk. Rather they attract retail and small investors looking to supplement their regular earnings with incomes from financial investments, who end up burning their fingers as a result of market movements beyond their control. It is the usefulness of these markets and instruments that are in question. If their role is to support speculation and little else, we may be better off doing away with them.

[C.P. Chandrasekhar taught for more than three decades at the Centre for Economic Studies and Planning, Jawaharlal Nehru University, New Delhi. He is currently Senior Research Fellow at the Political Economy Research Institute, University of Massachusetts Amherst, US. Courtesy: The author’s blog at https://www.networkideas.org.]

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When the Watchdog Befriends the Wolf: The Jane Street Scam and SEBI’s Betrayal of Indian People

Pawan Khera

In the sparkling towers of Mumbai’s financial district, where billions are moved and fortunes are made or lost in seconds, a silent crime unfolded, under the blinding light of regulatory inaction. This was not a heist pulled of in the dead of night. It was carried out day after day in full public view, promoted on media and social media platforms, orchestrated by Foreign Portfolio Investments and made possible by the very same regulator who was entrusted with the duty of overseeing the whole process. But it looked the other way.

The Indian stock market, particularly its derivatives segment, has long been portrayed as the great democratic frontier of wealth creation. Every young trader with a phone and a demat account was told that this was their ticket to prosperity. Apps, influencers, and brokerages sang the song of options trading, promising easy money and quick returns. And like moths travelling towards a flame, the Indian middle class walked with all their savings, dreams, and blind faith into a blind trap.

What they didn’t know was that the game was rigged. Between 2020 and 2025, more than 12 million individual traders jumped into options trading. With every weekly expiry, the market resembled less of a financial institution and more of a betting game, where odds were always stacked against the retail investor and where the FPIs always won. SEBI knew all of this, its own data showed that 93% of retail investors were losing their money (a staggering Rs 1.8 lakh crore worth of money over three years). We need to understand that the futures and options (F&O) market is a zero-sum game, meaning that for every loser, there is a winner. So, if 93% of retail investors are losing money, who’s making a profit? The answer is obvious: institutional players like Jane Street. This essentially means that the trading market has been reduced to a mechanism for transferring wealth from retail investors to the coffers of institutionalised foreign portfolio investors like Jane Street, all while SEBI stood by and did nothing.

These FPIs employed some of the brightest minds in the world to develop complex algorithms and trading codes that power their operations. Since their gains are directly tied to the losses of retail investors who are often ordinary individuals with limited market knowledge, it effectively means that retail investors were unknowingly competing against highly sophisticated computer systems built by top-tier talent from India and abroad. In other words, the game was rigged from the start. The retail investor never really had a fair shot at winning. The money that was lost wasn’t speculative capital from the rich. It was hard-earned money of the common Indian consisting of college funds, retirement savings, EMIs, marriage savings etc. The small investors bled, while large firms, like Jane Street, thrived.

This is not all, US-based quant firm Jane Street barely had any physical presence in India, but it somehow managed to control up to 28% of our entire derivatives market on key trading days.

Let that sink in.

A foreign entity with no major force in India was effectively dictating the movement of India’s stock indices and the regulator was sleeping. The methodology used by this rm was both simple and sinister. Jane Street was trading in both the cash market (where actual shares are bought and sold) and the derivatives market (where people bet on future price movements), using two separate companies. In the morning, one of Jane Street’s entities bought a large number of bank stocks, which caused the Bank Nifty index to go up. At the same time, another Jane Street entity placed a bet in the derivatives market that the Bank Nifty would fall later in the day. Then, just before the market closed on expiry day (when all bets in the derivatives market are settled), Jane Street allegedly sold o all the bank stocks it had bought, which caused the index to crash. Because of this drop, the bet they had placed earlier on the index falling made a huge profit. Such trade is called “marking the close”, and it’s illegal, even in the United States. So friends, this clearly shows a classic case of ‘morning pump, afternoon dump’.

All this while, SEBI, the regulator entrusted with protecting Indian investors, wasn’t just asleep, it stood complicit clapping from the balcony. Jane Street, operating through Indian brokerages like JSI Investments and foreign entities in Singapore and Hong Kong executed high-frequency trades, manipulated expiry prices, and repatriated profits without paying a single rupee in taxes on profits.

And here’s the most damning part: SEBI had the tools to stop this, yet it didn’t.

Section 22(1)(J) of the SEBI Act gives the regulator the absolute power to demand disclosure of ultimate beneficial ownership (UBO) from any FPI. But SEBI chose silence.

Another important question is why SEBI waited until July 2025 to pass an interim order blocking Jane Street from trading in the securities market. What’s most disturbing is not just the scale of the manipulation, but the sheer complacency of SEBI throughout the episode. It wasn’t SEBI’s vigilance that uncovered the irregularities, it was a lawsuit led in a US court in April 2024, where Jane Street accused its rival Millennium Management of stealing a proprietary strategy that had allegedly been used to extract massive profits from Indian markets. Instead of taking urgent proactive charge after this revelation, SEBI simply pushed the responsibility to NSE, directing it to examine Jane Street’s trades. The NSE, showing no sense of urgency, took a leisurely four months to submit its report in November 2024. Even then, SEBI only noted unusual volatility in index options in December 2024, something its own surveillance systems should have bagged months earlier.

Rather than act decisively, SEBI further passed the onus to NSE by asking it to issue a mere “advisory” to Jane Street in February 2025, an advisory that Jane Street ignored. And yet, SEBI still sat on its hands until July 2025, when it finally issued an interim order. In short, from April 2024 to July 2025, despite compelling signs of regulatory breach, SEBI remained largely unresponsive to the seriousness of the situation.

But now, after Rs 36,000 crore has already been looted from Indian markets by Jane Street, after the evidence has been compiled in a 105-page order, and after retail investors have suffered massive losses due to manipulated trades, Jane Street has quietly deposited Rs 4,843 crore into the escrow account. With that, SEBI has lifted its restrictions, and the US rm is now all set to resume trading. Shockingly, this deposit wasn’t made as a penalty or admission of guilt, but merely as a technical compliance with SEBI’s order, a formality to be allowed back in.

Yes, you read that right.

Jane Street, named in one of the most blatant market manipulation scandals in recent history, is back in action. The predator gets to walk back into the town, just because it paid at the gate. And what about the criminal prosecution? No names have been disclosed, and no entity has been permanently banned so far. Ideally, a company known for engaging in such unethical and exploitative practices should have been permanently banned by SEBI. Yet, here it is once again, ready to actively operate in the Indian markets, set to erode the hard-earned savings of retail investors.

Jane Street’s founder, Rob Granieri is an important name which is even linked to foreign regime change plot schemes and remains hidden behind layers of corporate opacity. SEBI neither asked who really owns the trading entities nor asked who funds them. SEBI never acted against the shady coordination between Jane Street’s Indian brokers and its offshore funds. It just asked the rm to deposit a fraction of its profits and said, “case closed.” In any other country, this would have sparked resignations, investigations and regime changes. In India, it barely made headlines.

So let us ask again: for the record. Why was SEBI so hesitant to act?

And why on earth did it delegate regulatory power to the NSE when the law mandates otherwise? Why did it not use Section 22(1)(J) to force Jane Street to disclose its beneficiaries?

This is a simple case of a regulator that forgot its mandate or we can say chose to forget its mandate. A regulator that, time and again, shields global hedge funds while Indian retail investors become their cannon fodder. It is the betrayal of sacred trust between a nation’s institutions and its people.

If regulators are allowed to look the other way while foreign predators erode the integrity of Indian markets, then all the chest-thumping about India becoming the fourth or third largest economy based on consumption means nothing. SEBI must answer now. Parliament must summon a Joint Parliamentary Committee must investigate. Because from whatever we understand, it’s certain that Jane Street is only the tip of the iceberg.

[Pawan Khera is chairman of media and communications of the Congress party. Courtesy: The Wire, an Indian nonprofit news and opinion website. It was founded in 2015 by Siddharth Varadarajan, Sidharth Bhatia, and M. K. Venu.]