Informist, Friday, Jul. 4, 2025

--SEBI releases interim order over index manipulation by Jane Street group

--SEBI bars 4 Jane Street group entities from securities market

--SEBI to impound INR 48.44 bln from Jane Street group entities

MUMBAI - The Securities and Exchange Board of India has banned four entities of Jane Street group, a global trading company, from participating in the securities market over allegations of index manipulation. In an interim order, the regulator also directed to impound INR 48.44 billion from the four entities.

The regulator found that Jane Street group entities made unlawful gains by manipulating the cash and derivatives markets. The entities infused large amount of funds in index constituents of Nifty 50 and Nifty Bank index constituents to manipulate prices in derivatives, especially options contracts.

"...the JS Group was consistently running what appeared to be by far the largest risks in 'cash equivalent' terms in F&O particularly on index option expiry days," the SEBI order said.

SEBI explained that the Jane Street entities would infuse large amounts of funds in Nifty Bank constituents in the cash market to drive the index higher. Later in the trading session, they would sell these stocks to manipulate prices of calls and puts, where they had already built positions in advance to benefit from their own selling in the cash market. The regulator alleged that the entities were involved in such intra-day manipulation of Nifty Bank and option contracts for at least 15 expiry days.

Despite SEBI sending a cautionary letter to its entities, Jane Street Singapore and Jane Street Group Investments, the global trading firm continued to manipulate the market, alleged SEBI. The order suggests that the entities went on to manipulate the Nifty 50 index on at least three separate occasions after the warning was issued in February last year.

SEBI said the Jane Street entities incurred losses of nearly INR 2 billion over the 15 days during which they engaged in intra-day index manipulation. The regulator said the entities saw these losses as cost of carrying out their "manipulative and fraudulent scheme". As a result, SEBI did not set off these losses while calculating the impounded amount.

Apart from intraday manipulations by Jane Street entities, SEBI observed another form of manipulation referred to as "extended marking the close". In this practice, an entity places large buy or sell orders in the final moments of a trading session to influence closing price of a security or index. "This practice is particularly concerning on derivative expiry days, as the closing price directly affects the settlement value of index-based contracts, thereby impacting payoffs for all market participants," the SEBI order said.

The regulator observed that Jane Street entities employed this practice on at least six occasions. For example, they sold large quantities of Nifty Bank constituents on Jul. 10, 2024, at a time when they had already built short positions in call and put options, as per the SEBI order.

In total, SEBI found 21 instances when the Jane Street entities had indulged in index manipulations through the two mentioned practices. SEBI also alleged that the Jane Street group set up a company in India, JSI Investments Pvt. Ltd., to bypass regulations that applied to foreign portfolio investors. End

Reported by Anshul Choudhary

Edited by Subhojit Sarkar

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