India's Securities and Exchange Board (SEBI) bans Jane Street from the Indian securities market, confiscating approximately $567 million.
In a significant regulatory move, the Securities and Exchange Board of India (SEBI) has barred U.S. trading company Jane Street and four of its related entities from participating in India's securities market. The decision comes following allegations of market manipulation by Jane Street through positions taken in equities derivatives.
The ban, which includes entities such as JSI Investments, JSI2 Investments, Jane Street Singapore, and Jane Street Asia Trading, prohibits them from accessing the local securities market either directly or indirectly. SEBI also plans to seize ₹4,844 crore (~$570 million) believed to be "unlawful gains" from manipulative trading activities, which could be the largest seizure ever by SEBI against a foreign trading firm.
The probe by SEBI was initiated after media reports revealed a legal dispute between Jane Street and rival firm Millennium Management in the United States. Jane Street accused two of its ex-traders who had joined Millennium of stealing its proprietary trading strategy, which reportedly generated nearly $1 billion in profits in India’s derivatives market in 2023, primarily by manipulating Indian stock indices, with a particular focus on the Bank Nifty index.
The alleged manipulation was carried out through extensive derivative trades. India, being the world's largest derivatives market by volume, especially in equity derivatives where it accounts for nearly 60% of global trades recorded recently, is a prime target for such activities. The concerns surrounding the risks retail investors face in the derivatives segment, where many individual traders lose substantial amounts, have been heightened by this incident.
The allegations against Jane Street highlight issues of market integrity in India's vibrant and highly liquid derivatives ecosystem, especially on contract expiration days where heavy manipulation risks exist. The case underscores SEBI's increasing scrutiny of foreign institutional investors and their trading practices in India.
Jane Street has publicly disputed SEBI’s findings but is currently barred from further trading activities in the Indian market pending the investigation's outcomes. SEBI will monitor Jane Street's activity on existing positions until the investigation is finalized. No new information about the alleged market manipulation investigation was provided in the current paragraph.
Meanwhile, other global trading firms, including Citadel Securities, IMC Trading, Millennium, and Optiver, are increasing their presence in India's derivatives markets. The Artha Global Opportunities Fund has also made its maiden India credit bet, indicating a growing interest in the Indian market despite the regulatory challenges.
[1] The Economic Times, "SEBI bars Jane Street from Indian market over alleged market manipulation," July 3, 2023. [2] Livemint, "Jane Street disputes SEBI's findings in alleged market manipulation case," July 5, 2023.
- The ban imposed by SEBI on Jane Street and its related entities, including JSI Investments, JSI2 Investments, Jane Street Singapore, and Jane Street Asia Trading, may deter other global businesses and investors from participating in India's securities market, given the increased scrutiny on market activities.
- The ongoing investigation into Jane Street's alleged market manipulation activities in India's derivatives market highlights the need for continuous monitoring of politics and business in the financial sector, especially given the potential risks to retail investors and the prime target status of India's derivatives market for such activities.
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