The Securities and Exchange Board of India (SEBI) has imposed a trading ban on Jane Street Group, a major US-based trading firm, after uncovering a systematic strategy that allegedly manipulated Indian indices for massive profits. According to a SEBI order released on Friday, the firm raked in a staggering ₹735 crore in a single trading day on 17 January 2024.

This windfall was part of a broader ₹36,500 crore profit Jane Street made in Indian markets between January 2023 and March 2025, raising red flags about the extent of foreign dominance and high-frequency trading in Indian derivatives.

What exactly did Jane Street do?

SEBI’s probe focused on trading in the Bank Nifty index and its constituent stocks. On 17 January 2024, following HDFC Bank’s earnings disappointment, the index opened much lower than the previous close.

Jane Street allegedly implemented a two-phase strategy:

▪ Phase I: Artificially inflating prices

Jane Street began by aggressively buying stocks and futures worth ₹4,370 crore in the morning. This drove up prices temporarily, creating the illusion of a market recovery. SEBI stated that this tricked retail and institutional investors into believing the fall had reversed.

During this period, the firm simultaneously built massive bearish positions in index options by buying cheap puts and selling expensive calls—effectively betting that the Bank Nifty would fall later in the day.

▪ Phase II: Triggering the fall

In the second half of the trading session, Jane Street liquidated its earlier long positions aggressively. This sell-off pushed prices down sharply, as anticipated. While the firm booked losses on its equity and futures trades, the gains from put options surged dramatically, more than offsetting those losses.

This manipulation generated the ₹734.93 crore profit in just one day.

Pattern of manipulation

SEBI found that this was not a one-off incident. The same tactics—termed "Intra-day Index Manipulation"—were used on 15 out of 18 days under investigation. On the remaining days, Jane Street allegedly used a related tactic called "Extended Marking the Close".

Even after receiving a warning from the National Stock Exchange (NSE) in February 2025, Jane Street allegedly continued its strategies. SEBI noted that the firm "disregarded both the Exchange's cautionary communication and their own pledges."

SEBI’s response

On July 5, SEBI banned Jane Street and four connected entities from trading in Indian markets. Banks have also been ordered to freeze ₹4,840 crore of alleged illegal profits made through these trades.

The investigation raises serious questions about the structure of India’s derivatives markets, where sophisticated global players using complex algorithms operate alongside uninformed retail investors.

SEBI’s key observations

  • Jane Street was taking “by far the largest risks” in India’s F&O segment in cash-equivalent terms.
  • Their trades were disproportionately large, especially on index expiry days.
  • They exploited their dominant position and high-speed systems to artificially influence prices, misleading others in the market.

The case underscores SEBI’s growing concern about algorithmic manipulation, especially by foreign players. As the regulator tightens oversight, this crackdown is likely to reshape how institutional trading firms operate in India’s rapidly growing derivatives market.