Jane Street Faces Expanded Investigation in India as Market Regulator Intensifies Scrutiny

India’s Securities Watchdog Widens Probe into Jane Street’s Trading Practices

India’s financial markets have entered a period of heightened scrutiny as the Securities and Exchange Board of India (SEBI) expands its investigation into Jane Street, one of the world’s most prominent quantitative trading firms. The probe, initially focused on alleged manipulation of a single index, now covers a broader range of indexes and exchanges, reflecting the regulator’s growing concerns about the integrity of its rapidly evolving financial markets.

Background: Jane Street’s Rise in India’s Booming Derivatives Market

Jane Street Group LLC, headquartered in New York, has become a major force in global financial markets through its sophisticated high-frequency trading (HFT) strategies. The firm is renowned for its dominance in exchange-traded funds and derivatives, with a global footprint that includes significant operations in Asia and the United States.

India’s derivatives market, now the world’s largest by contracts traded, has experienced explosive growth in recent years, fueled by a surge in retail investing and the proliferation of complex financial instruments. Jane Street capitalized on this boom, reportedly generating $4.3 billion in trading gains in India between January 2023 and March 2025. The firm’s aggressive strategies and substantial profits drew attention from both competitors and regulators, especially after a court battle with Millennium Management revealed Jane Street’s billion-dollar windfall from Indian equity derivatives.

The SEBI Investigation: Allegations and Actions

SEBI’s investigation centers on allegations that Jane Street engaged in market manipulation by using large sums of capital to influence the price action in both the futures and cash markets on weekly index options expiry days. According to the regulator, these tactics allowed Jane Street to secure outsized and profitable positions in highly liquid index options, misleading a large number of smaller individual traders in the process.

In a rare and forceful move against a foreign entity, SEBI has temporarily barred Jane Street from accessing Indian securities markets and ordered the seizure of $570 million—the amount the regulator claims represents the firm’s “unlawful gains” from these activities. The interim order, spanning 105 pages, details how Jane Street allegedly manipulated India’s Bank Nifty index by purchasing significant quantities of stocks in both the cash and futures markets to artificially support the index during morning trading, while simultaneously establishing large short positions in index options.

Jane Street’s Response and Legal Challenge

Jane Street has categorically denied the allegations and signaled its intent to challenge SEBI’s findings. In an internal email to staff, the firm expressed “extreme disappointment” at what it described as “highly inflammatory” claims, stating that it had repeatedly attempted to engage with the regulator and had made adjustments to its trading practices in response to earlier concerns. Jane Street maintains that its activities constituted basic arbitrage, not manipulation, and is preparing a formal rebuttal to SEBI’s order.

Economic Impact and Market Reaction

The repercussions of SEBI’s actions have been immediate and far-reaching. Shares of Nuvama Wealth Management Ltd., Jane Street’s local trading partner, plunged 11% in Mumbai, marking their steepest decline in three months. While India’s benchmark NSE Nifty 50 Index remained relatively stable, the broader market is bracing for potential volatility as other high-frequency trading firms reassess their strategies in light of the crackdown.

Tejas Shah, head of derivatives trading at Equirus Securities Pvt., noted, “SEBI is sending a message to global HFT giants that you are welcome to trade here but if you undertake unfair practices then we also hold a stick. I would expect some temporary impact on volumes as other HFTs sit back a little”. The chilling effect on trading activity could be felt across the market as firms weigh the risks of regulatory intervention.

Historical Context: India’s Evolving Approach to Market Oversight

India’s financial markets have undergone significant transformation over the past decade, with SEBI playing an increasingly assertive role in policing market conduct. The regulator has previously taken action against domestic players for irregularities, but its move against Jane Street marks one of the most high-profile cases involving a foreign firm.

This assertiveness reflects both the growing complexity of India’s markets and the challenges posed by sophisticated global trading strategies. The rise of high-frequency trading has brought efficiency and liquidity but also raised concerns about market fairness and systemic risk. SEBI’s expanded probe into Jane Street signals a determination to ensure that rapid innovation does not come at the expense of market integrity.

Regional Comparisons: How India’s Crackdown Stacks Up

India’s hardline stance on Jane Street stands in contrast to the regulatory environments in other major Asian financial centers. In Hong Kong, for example, Jane Street has been expanding its office space and workforce, capitalizing on a resurgence of investment activity and a 15% rally in the Hang Seng Index during the first quarter of 2025. The city’s regulatory framework has generally welcomed global market makers, with firms like Citadel Securities and Tower Research Capital also ramping up their presence.

While Hong Kong and Singapore have embraced high-frequency trading as a means to boost liquidity and attract international capital, India’s approach is now being closely watched as a potential model for balancing openness with robust oversight. The outcome of SEBI’s investigation could influence how other emerging markets address the challenges posed by global trading giants.

The Road Ahead: Uncertainty and Anticipation

As SEBI’s investigation widens to cover additional indexes and exchanges, the Indian financial community is awaiting further details on the progress and potential implications of the probe. Industry participants are keenly aware that the case could set important precedents for how foreign firms operate in India’s markets and how regulators respond to the complexities of modern trading.

For Jane Street, the stakes are high. The firm’s ability to defend its practices and maintain its foothold in one of the world’s most dynamic markets will depend on the outcome of its legal challenge and its willingness to adapt to India’s evolving regulatory landscape. Meanwhile, market participants and observers around the globe are watching closely, recognizing that the resolution of this case will reverberate far beyond India’s borders.

Public and Industry Reaction

The news of SEBI’s actions against Jane Street has generated significant discussion within India’s financial sector and among global investors. Some see the crackdown as a necessary step to protect retail investors and preserve confidence in the market, while others worry about the potential for overreach and the chilling effect on foreign investment.

Amid the uncertainty, one thing is clear: India’s financial markets are at a crossroads. The balance between innovation, competition, and regulation will shape the future of trading in the world’s most populous democracy—and the outcome of the Jane Street investigation may well become a defining chapter in that ongoing story.