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SEBI Cracks Down on Jane Street’s Alleged Market Abuse

India’s financial watchdog, the Securities and Exchange Board of India (SEBI), has issued a sweeping interim order banning Jane Street Group from accessing the country’s securities market. The regulator also ordered the freezing of over 48.4 billion Indian rupees (approximately $566.3 million), citing suspected unlawful profits from manipulative trading practices.

In a 105-page order released Thursday, SEBI alleged that the U.S.-headquartered quantitative trading firm engaged in systematic manipulation of India’s benchmark indices — the Nifty 50 and BANKNIFTY — through coordinated trades in stocks, futures, and options markets.

Banks were directed to ensure no debits are allowed from any Jane Street accounts in India, whether held individually or jointly, without prior SEBI approval.

How Jane Street Allegedly Manipulated the Market

SEBI accused Jane Street of implementing complex strategies that lacked any legitimate economic rationale, designed solely to distort market prices in their favor. The firm allegedly bought large quantities of BANKNIFTY stocks and futures early in the trading day, inflating the index’s value. Simultaneously, they placed substantial bets via options contracts that profited if the index declined.

Later in the session, Jane Street reportedly dumped the earlier positions, pushing the index lower — a move that significantly boosted the value of their derivative trades. Although the firm incurred some losses from the initial stock purchases, those were more than compensated by profitable options trades.

SEBI called the operation “a deliberate strategy to manipulate indices,” warning that the scale, repetition, and calculated reversals of these trades were manipulative, even if technically not in breach of existing law.

Prior Warnings Ignored, Regulator Says

In a scathing rebuke, SEBI said Jane Street’s actions continued even after receiving a formal advisory from the National Stock Exchange (NSE) in February 2025. That warning had urged the firm to avoid activity that could distort index performance. The regulator stated that Jane Street’s continued behavior showed “clear defiance” and demonstrated the firm was “not a good faith actor.”

SEBI emphasized the broader stakes:

“The integrity of the market, and the faith of millions of small investors and traders, can no longer be held hostage to the machinations of such an untrustworthy actor.”

Jane Street Responds

In response to CNBC’s request for comment, a Jane Street spokesperson rejected SEBI’s accusations, stating the firm is committed to compliance in all jurisdictions. The spokesperson added, “We will engage constructively with SEBI to address their concerns.”

While the firm has not yet announced legal action, regulatory lawyers note that the freezing of $566 million marks one of the largest enforcement seizures against a foreign entity in India’s financial history.

Market Integrity and Global Context

Experts believe SEBI’s move is intended not just as a punitive action but as a signal to other international firms. India has become the world’s largest derivatives market by contracts traded, and global players like Citadel Securities, Optiver, Millennium, and IMC Trading are ramping up operations in the country.

Deven Choksey, founder of DRChoksey FinServ, said the crackdown sets a “strong precedent”:

“Any entity abusing the market must face strict action. SEBI’s role is to protect integrity and fairness in price discovery for all participants.”

In a September 2024 report, SEBI had already flagged algorithmic and high-frequency trading practices as a growing concern, revealing that proprietary and foreign traders made profits of 610 billion rupees ($7.1 billion) in FY 2024, while retail investors suffered losses of equal magnitude.

What's Next for Foreign Trading Firms in India?

With SEBI stepping up surveillance and enforcement, the regulatory landscape is expected to tighten for high-frequency and proprietary trading outfits. While India remains an attractive market due to its liquidity and growing investor base, firms operating on the edge of legality may find it increasingly difficult to sustain aggressive strategies.

Analysts predict that more surveillance technologies, algorithm audits, and possible revisions to trading regulations could follow this high-profile case.

Final Thoughts

The action against Jane Street marks a critical moment for India’s financial market oversight. It sends a strong message that sophisticated trading tactics will not be tolerated if they undermine trust, stability, or fairness. As global capital continues to flow into Indian markets, the balance between innovation and regulation will remain a focal point for policymakers — and a challenge for every firm looking to compete in one of the world's most dynamic financial environments.