On July 03, 2025, the Securities and Exchange Board of India ("SEBI") issued a comprehensive interim order invoking its powers under Sections 11(1), 11(4), 11B(1), and 11D of the SEBI Act, 1992, in the matter concerning alleged market manipulation by Jane Street Group and its associated entities. The entities named in the order include JSI Investments Private Limited, JSI2 Investments Private Limited, Jane Street Singapore Pte. Ltd., and Jane Street Asia Trading Ltd., collectively referred to as the "Jane Street Group" or "JS Group." The order, spread over 100 pages, provides a detailed account of trading patterns, methodologies, and economic outcomes, supported by granular data analysis, and identifies prima facie violations of the SEBI (Prohibition of Fraudulent and Unfair Trade Practices relating to Securities Market) Regulations, 2003 (hereinafter referred to as "PFUTP Regulations").
The origins of SEBI's inquiry lie in media reports from April 2024 which covered litigation involving Jane Street Group and another trading entity, concerning alleged theft of Jane Street's proprietary trading strategies. These reports prompted SEBI to undertake a preliminary examination into the Group's trades in the Indian equity derivatives market, particularly their involvement in index options. SEBI subsequently directed the National Stock Exchange ("NSE") to examine the trading activity of the JS Group. NSE submitted its report in November 13, 2024, after which SEBI constituted a team for in-depth examination.
It is pertinent to note that SEBI has the statutory mandate under Section 11 of the SEBI Act to protect the interests of investors and ensure orderly functioning of the securities market. Section 11B empowers SEBI to issue directions in the interest of investors and market integrity. Further, Section 11D enables SEBI to restrain persons from accessing the securities market upon suspicion of market manipulation. The PFUTP Regulations, specifically Regulations 3 and 4, prohibit any fraudulent or manipulative conduct, including dissemination of misleading information and engaging in transactions that create a false or misleading appearance of trading.
Key Findings and Alleged Manipulative Conduct:
The interim order issued by SEBI against Jane Street Group is underpinned by extensive data-driven evidence pointing toward deliberate and systematic index manipulation through cross-segment trading strategies. The crux of SEBI's findings lies in two interlinked trading strategies allegedly deployed by the Group on index options expiry days: the "Intra-day Index Manipulation" strategy and the "Extended Marking the Close" strategy. These patterns were observed over eighteen trading sessions during the examination period from January 1, 2023 to March 31, 2025, with particular emphasis on January 17, 2024, the most profitable day for the Group.
A. Market Structure Exploitation on Expiry Days
The technical foundation of the alleged manipulation lies in exploiting the structural disparity between the illiquid underlying cash/futures markets and the highly liquid index options market. On expiry days, particularly in instruments such as BANKNIFTY, the notional turnover of index options exceeds cash and futures market volumes by over 90–100 times. This structural asymmetry allows a well-capitalized participant to move the index through aggressive trading in a relatively shallow cash/futures segment and derive significant gains from positions held in the options segment, where premiums are highly sensitive to even minor price movements in the underlying.
SEBI noted that on January 17, 2024, BANKNIFTY options witnessed a notional turnover of ₹1,03,17,127 crores, while the combined cash and futures turnover of its 12 constituent stocks was only around ₹1.05 lakh crore — exposing the extent of leverage and the potential for exploitation.
B. The "Intra-day Index Manipulation" Strategy: Patch-Based Execution
SEBI dissected the Group's trading activity into two discrete phases:
- Patch I (09:15 AM to 11:47 AM): Artificial Upward Index Movement
- During this window, the JS Group executed aggressive buy orders in both the cash and futures segments of BANKNIFTY constituent stocks. The total net buying across segments amounted to ₹4,370.03 crores, making the Group the largest net buyer by a significant margin. Notably, a large proportion of the Group's orders were placed at or above the Last Traded Price ("LTP"), resulting in a measurable upward impact on prices. This LTP-based impact was verified through SEBI's granular analysis, which showed, for example, that JS Group's trades alone accounted for +₹1,652.85 points in LTP movement for ICICI Bank, whereas the rest of the market had a net negative impact of nearly the same magnitude.
- The result was an artificial elevation of the BANKNIFTY index — moving from 46,573.93 to 47,176.97 within minutes, despite broader market bearish sentiment post-HDFC Bank's earnings announcement. This engineered index movement created false signals for market participants.
- Simultaneous Options Positioning
- While the index was being pushed up, the Group was building an opposite (bearish) position in the options segment — purchasing put options and selling call options. The artificially elevated index level allowed the Group to buy puts cheaply and sell calls at inflated premiums, creating a short straddle/strangle structure. The position sizing was disproportionately large — the index options exposure was 7.3 times greater than the long cash/futures position. Such simultaneous opposite exposure in derivatives and cash/futures is referred to as 'cross-segment manipulation' and is a red flag in surveillance systems worldwide.
- Patch II (11:49 AM to Close): Index Reversal and Profit Harvesting
- In the second half of the day, the Group reversed its earlier trades by aggressively selling the same basket of BANKNIFTY constituents, thereby putting downward pressure on the index. This aligned perfectly with its short options position — as the index declined, the value of the puts rose, and calls lost value, resulting in massive profits. The Group's losses in the cash and futures markets were more than offset by the gains in options, leading to a net profit of ₹734.93 crore on that day alone.
C. Quantitative Evidence of Price Impact and Market Dominance
SEBI's use of LTP-based impact analysis — both at the order and trade levels — provides compelling evidence of manipulative intent. For each scrip, SEBI computed the cumulative impact of trades placed above, at, and below the LTP. Across multiple high-weight BANKNIFTY constituents, the analysis revealed:
- Jane Street Group's trades contributed consistently positive LTP impact during the morning patch.
- In contrast, the rest of the market exerted a net negative LTP influence, indicating divergent behavior.
This pattern was further reinforced during a micro analysis of an 8-minute interval between 09:15–09:22 AM. For six key BANKNIFTY constituents (which represent over 87% of the index weight), SEBI found that JS Group's trades were the sole source of upward price momentum, against a backdrop of broader market sell-side pressure. The index rose over 600 points in that interval alone — largely attributable to this behavior.
D. Strategic Use of Leverage in Options Market
One of the key enablers of this strategy was the extraordinary leverage available in index options, especially near expiry. Options provide delta-equivalent exposure at a fraction of the capital outlay required in cash or futures segments. SEBI's analysis demonstrated that:
- A trader could obtain 100x exposure in options compared to the cash segment for the same underlying position.
- On January 17, 2024, JS Group used modest capital to create enormous options exposures, which were then monetized based on artificially induced index movements.
This capital-efficiency allowed JS Group to manipulate one market to profit in another, exploiting the tightly coupled pricing mechanism across segments.
E. Repetition and Continuity of the Strategy
The manipulative conduct was not confined to a single incident. SEBI noted that:
- 19 out of the top 30 most profitable trading days were expiry days.
- In 17 of these, similar index movement patterns were observed.
- Even after a caution letter was issued by NSE in February 2025, advising the Group to refrain from taking large positions or engaging in pattern-based trading, the Group continued its activities, most notably on May 15, 2025, triggering regulatory intervention.
The interim order also hints at sophisticated use of delta-neutral positioning, where the JS Group used long puts and short calls in a fashion that mimicked a synthetic short futures position. Given the low capital outlay in options near expiry and the spike in implied volatility during expiry sessions, this positioning allowed the JS Group to harvest volatility by creating gamma-positive trades that benefited from sharp index reversals—movements they themselves induced via underlying stock trades. Such setups are classical in statistical arbitrage strategies but become illegal when backed by price manipulation in the underlying instruments.
A key enabler of the JS Group's strategy was the interdependence between cash, futures, and options pricing governed by arbitrage bounds. Under normal conditions, deviations between these markets are limited due to arbitrageurs stepping in. However, by simultaneously impacting prices in illiquid cash and futures segments, and entering disproportionately large options positions (with high leverage), JS Group created artificial arbitrage windows, profiting from mispriced options that they themselves induced. This behavior distorts price discovery and undermines efficient market hypothesis.
Legal Assessment and Prima Facie Violations:
The conduct of the Jane Street Group, as outlined in the interim order dated July 3, 2025, presents a prima facie case of market manipulation and unfair trade practices in violation of the PFUTP Regulations, and the SEBI Act, 1992. The trading patterns adopted by the Group demonstrate systematic and premeditated acts aimed at distorting the price discovery mechanism of the securities market.
The strategy exploited the relatively nascent surveillance integration in India's F&O markets compared to jurisdictions like the US or EU, where cross-product manipulation is stringently flagged. The SEBI circular dated October 1, 2024, introduced shortly after JS Group's activity came under scrutiny, sought to reduce expiry day volatility by curbing index options overtrading—highlighting a direct regulatory response to these gaps.
The order reveals that the JS Group's net profit of over ₹43,000 crore in index options, while incurring consistent losses in cash and futures segments, indicates not just isolated gains but a systemic arbitrage on expiry days. With index options turnover on expiry days exceeding 353x the underlying cash segment (e.g., BANKNIFTY on Jan 17, 2024), even minor distortions in index levels have high notional impact, making such manipulative strategies both lucrative and systemically dangerous.
The SEBI has, on a prima facie basis, held the JS Group in violation of Regulations 3(a), 3(b), and 3(c) of the PFUTP Regulations, which prohibit any person from directly or indirectly engaging in or dealing in securities with the intention to manipulate the market, employ any device or scheme to defraud investors, or engage in any act which operates as a fraud or deceit upon any person in connection with securities transactions. Furthermore, the activities also contravene Regulation 4(2)(a), 4(2)(b), and 4(2)(e), which prohibit practices that involve creating a false or misleading appearance of trading, price rigging, and manipulating the price of securities for personal gain.
The strategy deployed by the JS Group involved artificially influencing the prices of BANKNIFTY constituent stocks during the initial hours of the trading session by undertaking large-volume buy orders at or above prevailing prices. These trades were designed not to achieve genuine market-based outcomes, but to create an impression of bullish sentiment in the underlying index. Thereafter, the Group entered into short positions in index options, profiting from the artificially induced price movements. This conduct constitutes manipulative trading as it distorts the equilibrium of demand and supply and misleads market participants regarding genuine market trends.
Such transactions, executed with the objective of influencing the closing price of the index to benefit open derivative positions, fall squarely within the purview of 'fraudulent and unfair trade practices' under the Regulations. The magnitude of the trades, the timing, the alignment of cash and derivatives segment activities, and the repeated deployment of this strategy across multiple expiry days, establish a pattern of conduct that is deceptive and prejudicial to market integrity.
Additionally, the said acts are in violation of Section 12A(a), (b), and (c) of the SEBI Act, 1992, which prohibit any person from using or employing any manipulative or deceptive device or contrivance, engaging in any act or practice that operates as a fraud upon any person, or engaging in insider trading, in connection with the issue, dealing or trading in securities.
The continued implementation of such strategies even after issuance of a cautionary letter by the Exchange in February 2025 reflects a deliberate and wilful disregard of regulatory oversight and constitutes aggravating conduct. The regulator has, accordingly, found it necessary to invoke its powers under Sections 11(1), 11(4), 11B(1), and 11D of the SEBI Act, 1992 to impose interim restraints and initiate further proceedings.
The acts of the Jane Street Group, as evidenced by data and analysis in the order, are not isolated trades but form part of a systemic mechanism to engineer price outcomes and profit from induced market behaviour, which is an affront to the foundational principles of market fairness, transparency, and investor protection enshrined in Indian securities law.
Outcome & Interim Measures
- SEBI has barred the Jane Street Group and associated entities — including JSI Investments, JSI2, Jane Street Singapore, and Jane Street Asia Trading — from trading in Indian securities until further notice
- Exchanges are instructed to monitor any future dealings by these entities to prevent circumvention.
- SEBI has impounded ₹4,843.57 crore (~US $570 million) — the largest disgorgement ever by the regulator — representing JS Grpup's illegal gains from alleged manipulative trading
- Funds must be deposited in an escrow account with a scheduled Indian bank, and no withdrawals are allowed without SEBI approval
- Open derivative positions held by JS Group on the date of the order must be squared off within three months or by expiry — whichever is earlier — under SEBI's directive
- SEBI clarified that the interim order is not a final show‑cause notice; the investigation remains ongoing
- Inquiry is expanding to cover other expiry days, indices beyond Bank Nifty/Nifty 50, and different pattern-based strategies
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