The Jane Street Scandal: Unveiling a Market Manipulation Scheme in India

The Securities and Exchange Board of India (SEBI) has uncovered a sophisticated market manipulation scheme orchestrated by Jane Street Group, a prominent U.S.-based proprietary trading firm, leading to significant allegations of unlawful gains and market distortion. This case has been widely characterized as a scam by SEBI and credible financial news outlets due to the scale and nature of the manipulative strategies employed. The regulatory action taken by SEBI represents one of the most stringent measures ever against a foreign trading firm in India, signalling a strong stance against market abuse.

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Jane Street: A Global Trading Powerhouse

Founded in New York in 2000 by a team of traders and technologists, Jane Street Group is a global proprietary trading giant. It boasts over 3,000 employees across five offices in the US, Europe, and Asia, trading in 45 countries and on more than 200 venues. The firm describes itself as utilizing "sophisticated quantitative analysis and a deep understanding of market mechanics to keep prices consistent and reliable," with an annual revenue of $20.5 billion in 2024.

Entry into Indian Markets and Massive Profits

Jane Street commenced its operations in India in December 2020, through a structure involving four entities: two India-based subsidiaries (JSI Investments and JSI2 Investments Pvt Ltd) and two foreign entities (Jane Street Singapore Pte Ltd and Jane Street Asia Trading Ltd) registered as foreign portfolio investors (FPIs) in Singapore and Hong Kong. These entities were managed collectively by Jane Street's overseas offices, as indicated by internal correspondence cited by SEBI.

Between January 2023 and March 2025, these four entities collectively generated ~ $5 billion (about ₹36,671 crore) in profits from trading equity options in India. This substantial presence came into broader public view in 2023 when Jane Street sued rival Millennium Management in a U.S. court, accusing them of stealing a proprietary trading strategy. During the court proceedings, it was inadvertently revealed that the strategy involved Indian options and had yielded $1 billion in profits for Jane Street in 2023 alone. These revelations and subsequent media reports in April 2024 concerning Jane Street's aggressive derivatives strategies prompted SEBI to launch a formal investigation.

 The Alleged Manipulation Strategy: "Pump-and-Dump" and "Marking the Close"

SEBI's investigation revealed a sophisticated and systematic strategy of market manipulation, primarily targeting the 12-stock Bank Nifty index and Nifty 50 index options on expiry days. This strategy involved two core tactics: "Intraday Index Manipulation" (often described as "pump-and-dump") and "Extended Marking the Close".

Pump-and-Dump Scheme

On expiry days, Jane Street would aggressively purchase significant quantities of banking stocks and futures in the morning, which are constituents of the Bank Nifty index. This buying spree artificially inflated the index, creating a false impression of market strength and luring unsuspecting retail investors into buying stocks or their derivatives at elevated prices. Simultaneously, Jane Street would take large short positions in index options, betting on a future decline.

Later in the day, Jane Street would aggressively sell off the same stocks and futures, causing the index to fall. This engineered downward movement enabled the firm to profit massively from its bearish options positions, which gained significant value. SEBI identified that while Jane Street might incur losses on the stock trades during this process, these losses were intentionally incurred and vastly outweighed by the profits from the much larger options positions. For instance, on January 17, 2024, Jane Street allegedly made ₹735 crore (or ₹734.93 crore) from Bank Nifty on that single day alone, which was deemed the beginning of SEBI's closer monitoring.

"Marking the Close" Strategy

Jane Street also employed an "Extended Marking the Close" strategy, particularly on index settlement days. This involved executing heavy trades in the final hour of trading to push the closing index price in its favour. By concentrating volume at crucial moments, Jane Street could influence the official settlement values of Nifty/Bank Nifty options, ensuring their large positions expire profitably. SEBI noted that most of the relevant trading days featured this pattern, amounting to "intra-day index manipulation" and "extended marking-the-close" strategies.

Orchestration and Entities Involved

SEBI's probe found that Jane Street's manipulative trades were routed through its four affiliated entities, which, despite being legally separate, were managed collectively by Jane Street's overseas offices. A critical aspect of the scheme was the strategic use of India-incorporated entities (JSI Investments and JSI2 Investments) to circumvent Indian regulations. Foreign Portfolio Investors (FPIs) are generally barred from undertaking intraday positions in the cash market in India. By routing some transactions through its local Indian entities, Jane Street found a workaround, allowing its domestic entities to execute large stock trades and futures transactions while its FPI arms handled related options positions. This created a "false or misleading appearance of market activity," which SEBI deemed egregious price manipulation.

Disregard for Regulatory Warnings

Despite concerns circulating in the market since early 2024 regarding Jane Street's aggressive trading strategies, and an explicit advisory issued by the National Stock Exchange (NSE) in February 2025, Jane Street allegedly continued its manipulative activities. This defiance played a significant role in SEBI's decision to ban the firm, with the regulator stating that Jane Street was "not a good faith actor" and its actions demonstrated a clear disregard for regulatory warnings.

Financial Impact and Regulatory Action

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SEBI's initial assessment indicated that Jane Street Group entities had profited a whopping ₹36,502 crore between January 1, 2023, and March 31, 2025, primarily from manipulating Bank Nifty stocks. Out of this, ₹4,843 crore (approximately $570 million) has been identified as "unlawful gains" that SEBI ordered to be impounded. SEBI has temporarily barred Jane Street and its four entities from the Indian stock markets and prohibited them from buying, selling, or dealing in securities, directly or indirectly. Banks holding accounts of these entities have been instructed to freeze any debit transactions without SEBI's permission. The interim order is in force until a final order is issued or until the alleged unlawful gains are returned. Jane Street has disputed SEBI's findings and stated its intention to engage further with the regulator.

Impact on Retail Investors and Market Integrity

The alleged manipulation by Jane Street has had a severe impact on retail investors, who form a significant portion of participants in India's derivatives market. SEBI's own study found that as many as 93% of retail traders misplaced and lost money trading within the alternatives market, with an average of ₹1.25 lakh per trader in FY24. This highlights the vulnerability of retail investors to sophisticated manipulation and the "deep damage" inflicted by such activities. The case underscores concerns about "money power" and liquidity imbalances, as institutional players control giant volumes. The manipulation no longer simplest distorts the market however additionally erodes belief and confidence within the system, growing unfair advantages for huge trading corporations.

SEBI's own study found that as much as 93% of retail investors lost money trading in the options market, with an average loss of ₹1.25 lakh per trader in FY24. This highlights the vulnerability of retail traders to sophisticated manipulation and the "deep damage" inflicted by such activities. The case underscores concerns about "money power" and liquidity imbalances, as institutional players control significant volumes. The manipulation not only distorts the market but also erodes trust and confidence in the system, creating unfair advantages for large trading firms.

Regulatory Responses

 

The Jane Street case has prompted significant regulatory responses and calls for reforms to strengthen market integrity. SEBI Chairman Tuhin Kanta Pandey has emphasized that market manipulation will not be tolerated and that surveillance has been increased.

Market-ban & Fund Seizure: SEBI issued an interim order on July 3, barring Jane Street and its local entities (JSI Investments, JSI2, Jane Street Singapore, Jane Street Asia Trading) from trading. It also attached ₹4,843.5 crore in assets, directing that these be held in escrow pending final judgment.

NSE & SEBI Surveillance: The National Stock Exchange (NSE) played a pivotal role by detecting suspicious expiry-day activity and issuing warnings as early as February 2025—alerts that SEBI says Jane Street blatantly ignored .

Legal Pushback: Jane Street has denied wrongdoing and plans to challenge the order through the Securities Appellate Tribunal, also reserving its right to seek judicial review. 

Conclusion

SEBI's decisive action towards Jane Street Group marks a significant moment for the integrity and regulation of India's capital markets. By identifying and performing upon as viewed as state-of-the-art market manipulation procedures, SEBI has sent a clear message that such practices, irrespective of the sophistication or worldwide stature of the firm concerned, will not be tolerated. A favorable decision has been  made to keep in mind the interest of investors and participants in the capital market. This case underscores the regulator's commitment to protect the interest of retail investors and ensure a level playing discipline, reinforcing consideration in the fairness and transparency of the Indian financial system.

The allegations towards Jane Street, characterized by SEBI as a deliberate scheme involving "pump-and-sell off" and "marking the close" strategies, spotlight the continued demanding situations of policing complicated algorithmic and high-frequency buying and selling. SEBI's probe revealed how Jane Street allegedly exploited regulatory loopholes and marketplace dynamics to generate sizable "unlawful gains," emphasizing the need for continuous evolution in surveillance and enforcement mechanisms. This action serves as an important precedent, in the stance of statements signaling that India is prepared to take stringent measures in opposition to marketplace abuse to protect its unexpectedly developing derivatives market.

Moving forward, this example will likely catalyze similar improvements in India's regulatory framework, specifically concerning foreign portfolio traders and the oversight of derivatives trading. It underscores the essential significance of the market to act in a positive ethical manner that made a significant replica of strong marketplace surveillance, coordinated regulatory responses, and clean tips to prevent large sophisticated entities from distorting marketplace prices for their own illicit gains. Ultimately, SEBI's firm stance against Jane Street reinforces its willpower and a disciplined nature to foster a truthful, efficient, and resilient capital market for all contributors and participants.