Regulator in India bans trading firm Jane Street Group

India’s market regulator has taken swift action against US trading firm Jane Street Group by temporarily prohibiting the company from participating in the local securities market. This decision comes following an investigation that revealed potential involvement in what has been described as “illegal manipulation.”

Over the past five years, India has experienced a surge in the trading of complex financial products, largely due to the influx of millions of new retail investors, particularly after the onset of the pandemic. This growth has positioned India as a key market for derivatives products, attracting interest from global high-speed trading giants. However, it has also drawn increased regulatory scrutiny.

The Securities and Exchange Board of India (SEBI) recently issued a 105-page interim order accusing Jane Street of engaging in market manipulation. The order restricts the firm from dealing in local securities. SEBI highlighted instances where the JS Group purportedly manipulated the securities that make up the BANKNIFTY and NIFTY indices. These actions were deemed to undermine market fairness and integrity, leading to illicit gains through trading activities in the index options markets.

SEBI emphasized the severity of the situation, noting that multiple liquid stocks with high retail participation were manipulated to impact the index options market significantly. This manipulation resulted in substantial profits for the perpetrators at the expense of other market participants, particularly retail traders. Consequently, SEBI announced its decision to “impound” ₹48.4 billion (US$567 million) from Jane Street, representing the alleged unlawful gains.

While the findings in the interim order are preliminary in nature, SEBI mentioned that if a detailed investigation clears Jane Street of any wrongdoing, the impounded funds will be released for their use, allowing the firm to resume its business operations. In response to the regulator’s actions, Jane Street issued a statement expressing its disagreement with the findings of the SEBI Interim Order and confirmed its intention to engage further with the regulatory authorities. The company reiterated its commitment to compliance with all regulations across the regions where it operates globally.

This development underscores the importance of regulatory oversight in maintaining market integrity and fairness, particularly in the context of evolving financial markets characterized by increased trading activities and complex products. As India continues to attract interest from international trading firms, robust regulatory mechanisms are essential to safeguard the interests of all market participants and ensure a level playing field for investors.