US-based proprietary trading firm Jane Street is under investigation by the Securities and Exchange Board of India (SEBI) over its derivatives trading activity spanning the past three years,
according to a report by Reuters. The market regulator is probing whether the firm attempted to manipulate India’s benchmark stock indices through its algorithmic strategies.
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.
According to Reuters, SEBI is assessing whether Jane Street followed a pattern of taking outsized positions in derivatives of index constituents, particularly bank stocks, and then trading those same stocks in the physical market to potentially sway index prices in its favour.
“The investigation is to establish whether there was a repeated pattern of taking outsized derivatives positions in index constituents, particularly bank stocks, then trading the index in the physical market to profit from its position,” a source told Reuters.
SEBI’s scrutiny follows reports that Jane Street earned exceptionally high profits from its India-based derivatives trades — nearly five times the earnings of the next-largest trading firm in the same segment. Jane Street reportedly posted a revenue of about Rs200bn (billion) or US$2.34bn from India in 2024 alone, amounting to roughly 11.2% of its global net trading revenue of US$20.5bn, as per Bloomberg data cited in the Reuters report.
While India does not prohibit intraday trading in both derivatives and physical markets, repeated patterns involving trades exceeding Rs10bn tend to trigger alerts in SEBI’s surveillance systems. The market regulator is now compiling a report with input from the National Stock Exchange (NSE), after which Jane Street will be issued a formal notice seeking clarification on its trading activities.
SEBI defines algorithmic trading as any order generated using automated execution logic. To enhance market efficiency and transparency, SEBI introduced algo trading through a direct market access (DMA) facility, which provided significant advantages such as faster order execution, reduced transaction costs, greater transparency, better audit trails and improved liquidity.
In 2012, the market regulator provided broad guidelines on algo trading, where orders are generated using automated execution logic. Later, measures were introduced to strengthen controls around algo trading.
In May, the regulator announced fresh guidelines to enhance risk monitoring and streamline trading operations in the equity derivatives segment. This includes proposals to strengthen audit requirements for algorithmic trading programs used by firms like Jane Street.
Jane Street, renowned globally for its high-frequency (HF) and ETF trading expertise, established its Indian presence in December 2020 through JSI Investments. Its meteoric rise in India's derivatives landscape, however, now faces serious questions from regulators.
Further intrigue surrounds Jane Street’s India operations due to a separate legal battle in the US. In December 2024, hedge funds Millennium Management and Jane Street settled a lawsuit to over the alleged theft of a secret billion-dollar India options trading strategy following the defection of two traders. In April 2024, Jane Street sued Millennium Management and traders Douglas Schadewald and Daniel Spottiswood. The firms agreed to dismiss the case, according to a US court filing.
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report from Bloomberg says, while the case was settled confidentially in December 2024, court proceedings revealed that Jane Street earned US$1bn in profits from the contested strategy in 2023 alone, drawing attention to its growing dominance and success in India’s derivatives space.
The Jane Street probe could set a precedent for how Indian regulators engage with global trading giants operating in domestic markets, especially as technology-driven strategies become more sophisticated and influential.
