SEBI Bans Jane Street for Stock Market Manipulation: What Went Wrong

The Securities and Exchange Board of India (Sebi) has issued an interim order against four entities belonging to the Jane Street Group, accusing them of manipulating the Indian stock market by distorting the prices of index derivatives, particularly on expiry days. The entities named in the order are JSI Investments Pvt Ltd, JSI2 Investments Pvt Ltd, Jane Street Singapore Pte Ltd, and Jane Street Asia Trading Ltd.

Sebi stated that the trades carried out by the Jane Street Group were “prima facie fraudulent and manipulative” and in violation of India’s capital market regulations. The manipulation allegedly involved a repeated trading strategy in the BANKNIFTY index on weekly expiry days. The group would aggressively purchase stocks and stock futures in the morning, artificially inflating the index level. At the same time, they built large short positions in index options — buying puts and selling calls — thereby taking advantage of the inflated index.

Later in the day, they would sell off the earlier purchased stocks and futures, causing the index to drop and resulting in substantial profits from the bearish positions in options. For instance, on January 17, 2024, this strategy reportedly yielded a net gain of over ₹734 crore for the group. On that day, Jane Street made cash and futures purchases worth ₹4,370.03 crore and simultaneously created short positions in index options valued at 7.3 times the long positions.

Sebi also pointed out that this strategy leveraged the large participation of retail investors in index options on expiry days. On January 17 alone, more than 16 lakh unique entities traded in BANKNIFTY index options, whereas only 4,675 participated in the cash market of the index’s top three stocks. Sebi concluded that the group exploited this imbalance by significantly influencing the index, misleading retail participants who rely on index movement to trade options.

Further investigation revealed that between January 2023 and March 2025, the Jane Street entities earned ₹36,502 crore in total profits from the Indian markets. A staggering ₹43,289 crore of this came from index options trading, while they posted cumulative losses of ₹7,687 crore in other segments, such as stock futures, index futures, and the cash market. This unusual concentration of profits from one segment raised red flags and prompted deeper scrutiny into 18 specific trading days.

Despite a caution letter issued in February 2025 by the National Stock Exchange (NSE) — on Sebi’s instruction — to Jane Street Singapore Pte Ltd and JSI Investments Pvt Ltd, advising them to avoid large cash-equivalent positions and suspicious patterns, the group continued the same behavior. Sebi noted that this blatant disregard for regulatory advice further justified the need for immediate intervention.

The regulator concluded that the trading strategies used by Jane Street, including “Intra-day Index Manipulation” and “Extended Marking the Close,” were clear violations of the Prohibition of Fraudulent and Unfair Trade Practices (PFUTP) regulations. Sebi emphasized that urgent interim action was necessary to prevent continued violations and to uphold market integrity.

While the order remains interim and a final decision is pending, Sebi’s swift action sends a stern warning to market participants against exploiting structural loopholes and retail investor behavior for outsized profits.