Updated at 6.43pm on 5 July 2025 to include response from Jane Street.
In a bold regulatory action, market regulator Securities and Exchange Board of India (SEBI) has issued an interim order against four entities under the Jane Street group for allegedly manipulating India’s index derivatives market, particularly the Bank Nifty index options segment. The regulator has restrained these entities from accessing or dealing in Indian securities markets until further notice and directed that illegal gains of Rs4,843 crore be escrowed with SEBI. Jane Street has disputed the findings of SEBI's interim order, saying that it will further engage with the regulator.
The
interim order, issued on 3 July 2025, names JSI Investments Pvt Ltd, JSI2 Investments Pvt Ltd, Jane Street Singapore Pte Ltd, and Jane Street Asia Trading Ltd. SEBI's investigation into the Jane Street group (JS group) revealed that, between January 2023 and March 2025, the group made total net gains of Rs36,671 crore in Indian markets—primarily driven by Rs44,358 crore profits in index options. These were offset by losses of Rs7,208 crore in stock futures, Rs191 crore in index futures and Rs288 crore in cash equities. The massive profit concentration in index options raised red flags, prompting a deeper probe.
To illustrate how Jane Street manipulated the thinly-traded cash market to make disproportionate gains from the options market, SEBI highlighted data from 17 January 2024, a weekly Bank Nifty expiry day. The total traded turnover in the cash market for the 12 Bank Nifty constituent stocks was Rs29,225 crore. In comparison, their futures saw Rs43,589 crore in turnover, and Bank Nifty index futures added another Rs32,607 crore. However, the Bank Nifty options market posted a staggering Rs1,03,17,127 crore in cash-equivalent turnover—353 times the cash market and 98 times the combined cash and futures markets. That same day, 752 unique entities traded in the cash market, 26,593 in Bank Nifty futures, but an astronomical 16.15 lakh entities traded Bank Nifty options.
SEBI says that such an imbalance in volumes creates fertile ground for manipulation. Entities with substantial capital and coordinated strategies can move the underlying index via trades in constituent stocks and futures, misleading retail investors who are largely active in the index options segment. SEBI termed this as prima facie benchmark manipulation and a violation of its Prohibition of Fraudulent and Unfair Trade Practices (PFUTP) Regulations.
SEBI's forensic analysis of trading patterns on 21 days identified two broad strategies used by JS group. On 17 January 2024 and 14 other Bank Nifty expiry days, the group deployed what SEBI termed as 'Strategy A'. This involved an aggressive purchase of Rs4,370 crore worth of Bank Nifty constituent stocks and futures in the morning which artificially lifted the index. Simultaneously, the group offloaded Rs32,115 crore of bearish Bank Nifty index options—buying puts and selling calls. In the second half of the trading session, they aggressively sold Rs5,372 crore worth of the same underlying stocks and futures, pushing the index downward. At its peak, JS group held Rs46,620 crore in short Bank Nifty option positions. This strategy yielded a one-day profit of Rs735 crore in index options, while incurring a minor intra-day loss of Rs61.6 crore in cash and futures.
'Strategy B' or 'Extended marking the close' was seen on 10 July 2024 and two other expiry days. It describes a market manipulation tactic where an entity places sizable buy or sell orders near the end of a trading session to deliberately influence the closing price of a stock or index. “This is especially problematic on derivative expiry days, as the final price directly impacts the settlement values of index-linked contracts, thereby affecting payouts for various participants. The strategy often involves aggressive trading shortly before market close to skew the closing value in a direction that benefits larger derivative exposures tied to that asset,” says the SEBI order.
“Given that Bank Nifty options expire based on the index's closing value, any last-minute price distortion, including a push-down in the Index value, can yield a significant economic advantage to entities holding enormous short Call or long Put positions.” On 10th July, the group waited until the final two hours of trade before aggressively selling stocks, futures and Bank Nifty futures—worth Rs2,800 crore—pushing the index lower. They carried a Rs44,154 crore short position in Bank Nifty options into the close, booking gains of Rs225 crore due to the soft closing.
On three separate occasions in May 2025, coinciding with Nifty expiry days, SEBI noted a reversed pattern. In those instances, Jane Street entities aggressively bought Rs4,911 crore worth of Nifty constituent futures in the last two hours, while holding a long Nifty index option position valued at Rs38,297 crore. These trades reportedly benefited from a higher close, again raising concerns of price influence.
On 15 May 2025 the trading pattern observed on this day reflected a bullish variation of the 'extended marking the close' strategy. Jane Street group engaged in significant purchases of Nifty and constituent futures during the final 116 minutes of trading, aiming to push Nifty index higher into the close. This coincided with a notable shift in the Group’s options positions—primarily through buying Nifty calls and selling Nifty puts, resulting in a net build-up of bullish delta exposure.
At the session's start, Jane Street’s delta stood at Rs17,125.75 crore negative, which flipped to Rs38,297.01 crore positive by the close, marking an intra-day swing of over Rs55,422.76 crore. Within this, the delta attributable to contracts expiring the same day increased by Rs49,568.52 crore, with the most aggressive build-up occurring in the final hour.
The day unfolded in two distinct phases:
Phase-1 (09:15–13:26): Activity remained passive and largely non-directional, with minimal delta fluctuations.
Phase-2 (13:26–15:25): Trading intensity surged, particularly in index and constituent futures, as Jane Street ramped up long exposure.
SEBI’s findings are rooted in the fundamental interlinkages between equity spot, futures and options markets. Prices in the derivatives market are directly influenced by movements in the underlying cash market stocks. In turn, index benchmarks such as Nifty or Bank Nifty are weighted averages of their constituent stocks, making them susceptible to short-term price shifts in heavily traded scrips. The kicker is disproportionate gains and losses that arise from changes in option values linked to the cash market.
The order explains that aggressive trading in relatively illiquid cash or futures markets—especially on expiry days—can be used to influence index levels and thereby mislead traders in the vastly more liquid index options segment.
Jane Street Ignored SEBI Warning
Having suspected market manipulation, SEBI had first warned Jane Street. But JS group apparently chose to ignore it. In the strongly worded order Ananth Narayan C, whole-time member (WTM) of SEBI says, "As recently as May 2025, as has been clearly demonstrated in this order, JS group again resorted to undertaking prima facie manipulative ‘extended marking the close’ trading patterns of large and aggressive intervention in index and constituent markets towards the expiry day closing, so as to influence and manipulate the index to their illegal advantage. The impugned trades in May 2025 are a cynical violation of the caution letter issued to the JS Group on 6 February 2025, and of their own declarations made to National Stock Exchange (NSE) in the same month."
"Such egregious behaviour, in clear disregard and defiance of the explicit advisory issued to them by NSE in February 2025, amply demonstrates that unlike the vast majority of foreign portfolio investors (FPIs) and other market participants, JS Group is not a good faith actor that can be, or deserves to be, trusted. The integrity of the market, and the faith of millions of small investors and traders, can no longer be held hostage to the machinations of such an untrustworthy actor. Investor protection forms the core of SEBI’s regulatory mandate. In the face of such a strong prima facie case that allowing the JS Group to continue as before may severely compromise investor protection on an extraordinary scale, SEBI has a duty to directly intervene," the order says.
SEBI's findings assert that the Jane Street group’s activities misled lakhs of retail options traders by artificially affecting index movements through large cash and futures market trades. The regulator has stressed that, while options trading is legitimate, using underlying market trades to distort index levels and profit from misled market expectations violates securities laws.
Despite SEBI issuing a caution letter via NSE in February 2025—warning Jane Street entities to refrain from large cash-equivalent index option positions and avoid manipulative trading patterns—the group continued to engage in similar activities. Notably, on 15 May 2025, JS group, once again, executed substantial index-related trades, ignoring previous assurances given to the Exchange.
Given the gravity of the situation, SEBI has directed all four Jane Street entities to deposit their alleged illegal profits of Rs4,843 crore in an escrow account and barred them from trading in Indian securities markets, pending further investigation. The order notes that, while a final determination may take time, interim restraints are necessary to safeguard market integrity. SEBI has also acknowledged that the balance of convenience lies in restricting the group’s market access temporarily rather than imposing an indefinite ban at this stage.
The entities have been granted 21 days to respond and request a personal hearing. SEBI’s final ruling will depend on the strength of their defence and further analysis. For now, the interim order marks one of the most assertive actions taken by the market regulator against a globally renowned high-frequency trading firm and signals heightened scrutiny over index expiry-day distortions in India’s booming derivatives market.
Earlier this month, Reuters reported that the US-based proprietary trading firm is under SEBI investigation over its derivatives trading activity spanning the past three years. The investigation, reportedly one of SEBI’s most far-reaching into an international trading entity, focuses on Jane Street and its subsidiaries, Jane Street Singapore Pte and JSI Investments, the Indian unit of the quant trading powerhouse.
UPDATE
In an email response, a spokesperson of Jane Street stated, "Jane Street disputes the findings of the SEBI interim order and will further engage with the regulator. Jane Street is committed to operating in compliance with all regulations in the regions we operate around the world."
