US trading firm Jane Street files case against Sebi

Jane Street filed a case against Sebi in the court of appeals for securities, accusing India's markets regulator of not providing documents and data relevant to counter market manipulation allegations, according to a Reuters report.

This is a fresh flash point between the regulator and the US trading giant after the latter was barred from Indian markets in July this year for profiting from derivatives through manipulation. Jane Street was later allowed to resume trading after it deposited Rs 4,844 crore of alleged unlawful gains in an escrow account.

The latest case was filed before the Securities Appellate Tribunal (SAT), the first point of appeal against Sebi orders. According to Reuters, the appeal seeks directions from SAT to instruct Sebi to provide Jane Street with the missing materials.

Jane Street-Sebi saga

The action on Jane Street by Sebi was one of the strongest actions it has taken against a foreign investor. The Wall Street trader made $4.23 billion by trading on Indian derivatives between January 2023 and March 2025, according to the Sebi, of which $567 million were "unlawful gains."

These hefty profits also came at a time when there was an unprecedented boom in India's futures and options market. The notional value of derivatives traded in India in 2023 was 422 times the value of the cash market. In most other global markets at that time, derivatives traded at between five and 15 times cash value. According to a Sebi circular, over 90% of options traders in India lose money.

Sebi investigation revealed that Jane Street accumulated large volumes of the constituent stocks of Nifty Bank in cash and futures markets, pushing index prices higher. In the mornings of days it engaged in such trades, it also used derivatives to short the index.

The firm then sold the shares in cash and futures markets. The sheer size of Jane Street's positions meant that it pushed down the price of the index, thereby profiting from the shorts.

There was some hit to volumes in the short run after the ban. Leading exchange NSE saw a decline in index options premium turnover -- a key indicator of risk appetite and capital deployment in the F&O segment.

Jane Street, on its part, believes that the regulatory curbs reflect a 'misunderstanding of standard hedging practices and the inter-relationships between derivative and underlying markets.

What next

The legal fight between Jane Street and Sebi is now likely to drag on for months, given the complexity of the charges and the stakes involved. For Jane Street, access to Sebi’s complete investigation records is critical to mount a credible defense, especially as it seeks to prove that its trades were legitimate hedging strategies rather than manipulative bets.

If SAT sides with Jane Street and orders Sebi to provide the missing documents, the case could reopen key aspects of the regulator’s probe.

(Disclaimer: Recommendations, suggestions, views, and opinions given by the experts are their own. These do not represent the views of The Economic Times)