US trading firm Jane Street files case against India market regulator over market manipulation allegations.
Jane Street Challenges India Market Regulator
On Wednesday, September 3, 2025, Jane Street, a US-based high-frequency trading firm, filed a case against India’s market regulator, the Securities and Exchange Board of India (SEBI), at the Securities Appellate Tribunal (SAT) in Mumbai, contesting allegations of market manipulation. The firm seeks access to documents to defend itself.
The dispute between Jane Street and India’s market regulator highlights the region’s growing scrutiny of foreign financial institutions, potentially impacting investor confidence and regulatory frameworks across South Asia’s booming derivatives markets.
Details of the Legal Challenge
Jane Street’s appeal, lodged with the SAT, the first appellate body for regulatory orders, argues that SEBI has withheld crucial documents and data necessary to rebut claims of market manipulation. A source familiar with the matter stated that the firm’s filing requests SAT to direct SEBI to provide these materials, described as “undeniably relevant” in court documents. Jane Street declined to comment, and SEBI did not immediately respond to inquiries.
Background of SEBI’s Allegations
On Friday, July 4, 2025, SEBI issued an interim order barring Jane Street from trading in India’s securities market, alleging manipulation of key indices, including the Bank Nifty. The regulator seized INR 4,843.57 crore (approximately USD 566.7 million) in alleged unlawful gains. SEBI’s 105-page order detailed how Jane Street entities bought large volumes of Bank Nifty constituents in the cash and futures markets to inflate the index, while simultaneously taking short positions in index options to profit as the index later fell.
The investigation, covering the period from January 1, 2023 to May 31, 2025, identified multiple intricate manipulative strategies, such as aggressive intra-day buying followed by late-hour selling to distort closing prices. Jane Street deposited the full amount into an escrow account and was allowed to resume trading from July 21, 2025, under close regulatory supervision. The full scope of SEBI’s findings—including 15 instances on Bank Nifty expiry days, profits totalling several thousand crore rupees, and coordinated actions across entities—was outlined in the order.
Jane Street’s Defence
Jane Street has described its trading practices as “basic index arbitrage,” a common strategy to align pricing divergences between cash and derivatives markets. In an internal email to staff, reported by Reuters on Tuesday, July 8, 2025, the firm expressed disappointment at SEBI’s “inflammatory” accusations, asserting it had engaged with regulators and modified its trading behaviour following concerns raised by the National Stock Exchange (NSE) in February 2025. The firm argues that SEBI’s claim of non-cooperation is unfounded, citing multiple meetings with regulators.
Regulatory Context
India’s derivatives market, the world’s largest by contract volume, has attracted global trading firms like Jane Street, Citadel Securities, and Optiver. SEBI’s actions reflect heightened vigilance, with Chairman Tuhin Kanta Pandey announcing enhanced surveillance on Monday, July 7, 2025, to curb manipulation in derivatives trading. A September 2024 SEBI report noted that proprietary traders and foreign portfolio investors earned INR 610 billion in profits in FY 2024, while retail investors incurred equivalent losses, underscoring the regulator’s focus on protecting smaller market participants.
Background
Jane Street, a New York-based proprietary trading firm with over 3,000 employees, is a major player in global markets, reportedly accounting for over 10% of North America’s equity trading volume in 2023. The firm’s alleged strategies in India involved synchronised trading between its Hong Kong and Singapore entities, which SEBI claims masked directional bets and bypassed foreign portfolio investor (FPI) rules. SEBI’s order noted that these entities, registered as FPIs, failed to adhere to investment concentration and disclosure norms, raising questions about compliance with FPI regulations. The case echoes prior Indian regulatory actions, such as the 14-year ban on Ketan Parekh in 2007 for manipulating stock prices, upheld by the Supreme Court.
The controversy began gaining attention in April 2024, when Jane Street sued competitor Millennium Partners in the US, inadvertently revealing details about its Indian options trading. This prompted SEBI’s year-long investigation, culminating in the July 2025 ban and asset freeze. Jane Street has since deposited INR 4,843.6 crore into an escrow account, requesting SEBI to lift the trading ban, a matter currently under examination.
What’s Next
The SAT’s ruling on Jane Street’s appeal could set a precedent for how India’s market regulator handles foreign trading firms. A decision compelling SEBI to release documents may strengthen Jane Street’s defence, while a rejection could escalate the dispute to India’s Supreme Court, further shaping regulatory oversight in South Asia’s financial markets.
Published in SouthAsianDesk, September 3rd, 2025
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