Jane Street Group barred from stock market over Rs 4,843 crore in unlawful index derivatives gains

Market regulator Securities and Exchange Board of India (SEBI) on Thursday, July 3, in an interim order, barred the Jane Street Group and its related entities -- JSI Investments Private Ltd, JSI2 Investments Private Ltd, Jane Street Singapore Pte. Ltd and Jane Street Asia Trading Ltd, from accessing the securities market. This is crucial to preserve the overall faith in the ecosystem and to protect investors, SEBI said.  

The entities are prohibited from buying, selling, or otherwise dealing in securities, directly or indirectly, according to the SEBI interim order.

The order further states that the unlawful gains earned by the JS Group entities, from the alleged violations, amounting to Rs 4,843 crore, will be impounded and the entities have been directed to open an escrow account in a scheduled commercial bank in India to deposit these unlawful gains.

"Entities are directed to open escrow account in a Scheduled Commercial Bank in India to deposit jointly and severally the aforesaid amount of unlawful gains with a lien marked in favour of SEBI and the amount kept therein shall not be released without permission from SEBI," the market regulator said.

Out of the 4 entities involved in this case, two entities - i.e. Jane Street Singapore Pte Ltd. And Jane Street Asia Trading Ltd. are registered FPIs, incorporated in Singapore and Hong Kong respectively. One entity, i.e. JSI Investments Private Limited is incorporated in India in December 2020 and located in Mumbai.

It was wholly owned by Jane Street Europe Limited, a company incorporated in United Kingdom. JSI2 Investments Private Limited was incorporated in India in September 2024 and located in Mumbai. It was wholly owned by JSI Investments Private Limited.

"Note that the email sent by Jane Street to SEBI dated August 30, 2024, and the letter from Jane Street to NSE dated February 21, 2025, both indicate that all Jane Street Group entities dealing in Indian markets act collectively, and are overseen by senior personnel based overseas," SEBI noted.

SEBI said prima facie finding that Bank Nifty index- a major index of the securities market comprising 12 stocks of India's major banks was manipulated in a complex and illegal manner aided by the JS Group's immense trading, financial and technological prowess. 

"Past instances of securities market violations have mostly involved individual stocks or segments. However, this is an unusual case where prima facie, multiple liquid stocks with high retail participation have together been manipulated to facilitate the manipulation of the index options market, resulting in massive profits for the manipulators, at the cost of other participants and retail traders," SEBI said.

SEBI said FPIs are permitted by law to deploy funds within specified limits and divest their holdings without any restrictions around repatriation. In the case of the JS Group entities, their core activity does not involve medium-term or long-term 'investments' as is generally understood, SEBI said.

Depositories are ordered to ensure no debits are made without prior permission from the market regulator. Banks, Custodians and the Depositories are directed to ensure that all the aforesaid directions are strictly enforced and complied with, SEBI said.

The regulator in its order asked entities to close or square-off any positions within the next three months or at the expiry of such contracts, whichever is earlier. Credits, if any, into the accounts may be allowed.

Entities shall not dispose of or alienate any of their assets/properties in India, till such time, the amount of unlawful gains is credited to escrow account except with the prior permission of SEBI.

"Stock Exchanges are directed to closely monitor any future dealings and positions of JS Group on an ongoing basis, to ensure that Entities do not either directly or indirectly indulge in any kind of manipulative activity, including by dealing in securities using any of the patterns identified or alluded to in this order, till the completion of the investigation by SEBI and the consequent proceedings, if any," SEBI said.

Jane Street Group LLC is a global proprietary trading firm and employs more than 3,000 employee in five locations across the US, Europe and Asia, trading in a broad range of asset classes on more than 200 venues in 45 countries. It uses algorithms to identify trading opportunities in the market.

F&O & retail investors

SEBI noted that the findings of an earlier research report by SEBI which inter alia states that 93 per cent of retail investors made losses when trading in the options market now gains additional context. 

"Such losses when juxtaposed with the abnormally high profits made by JS Group entities as a result of the prima facie manipulation of the cash, futures and options markets, is reflective of the deep damage that the group has inflicted through their illegal activities," SEBI said. 

SEBI said making profits while dealing in securities by itself is certainly not objectionable. Genuine trading strategies such as arbitraging or hedging or directional positioning are well accepted and cannot be found fault
with, it said. 

"What is, however, unacceptable and illegal, is the use of egregious manipulative practices to create opportunities to manipulate markets, influence and manipulate indices, and artificially profiteer from such moves with their large trading and risk positions in index options markets," it said.

Here is a timeline of the events highlighted in the SEBI order:

April 2024: SEBI analyses based on media reports referencing a legal dispute involving Jane Street Group for alleged unauthorised use of their proprietary trading strategies in the Indian markets.

July 23, 2024: NSE asked to examine trading activity of JS Group to ascertain any market abuse.

August 2024: SEBI interacted with JS Group on August 20 and JS Group submitted its response on August 30, explaining their trades.

November 13, 2024: NSE examination report on JS Group trading activity submitted.

December 2024: SEBI observed what appeared to be abnormally high or low volatility on weekly index options expiry day. SEBI also noted there were certain entities consistently running what appeared to be by far the largest risks in cash equivalent terms in F&O terms, particularly on expiry day.

February 4, 2025: Officials noted that prima facie, JS Group appeared to be engaging in activities in violation of SEBI PFUTP regulations

February 6, 2025: As per SEBI's instructions, NSE issued a caution letter to Jane Street Singapore Pte. ltd. and its related entities, to ensure that the JS Group desisted from undertaking trading patterns that were prima facie fraudulent and manipulative.

February 2025: JS Group sent their responses to the caution letter on February 6 and February 21, 2025.

May 15, 2025: JS Group was found to continuing running very large cash-equivalent positions in index options, in disregard to the caution letter issued by the NSE.