Jane Street Capital, a New York-headquartered proprietary trading and market-making firm, was temporarily barred by the Securities and Exchange Board of India (Sebi) from participation in the country’s securities market in early July.
Following an interim order by the regulator, Jane Street deposited US$567 million in escrow as surety to be able to resume trading while the investigation continues. At the time of writing, the regulator had yet to greenlight the US firm’s re-entry into the market.
The case hinges on India’s options, derivatives and futures market, which has enjoyed runaway growth with the participation of small retail investors, creating the world’s largest derivatives market. According to Reuters, India contributed roughly 60% of global equity derivatives trading volume in May 2025.
Sebi’s case appears to be that Jane Street took cash and futures positions in main market constituent stocks to create momentum, then sold out before end of trading to benefit from short positions in corresponding index options.
The regulator’s case against Jane Street built up through early 2025. In February, Sebi instructed the National Stock Exchange to issue a cautionary letter to the firm, advising it against taking large positions and undertaking certain trading activities. By May, according to Bloomberg, Jane Street resumed enough activities to prompt the regulator to take further action.
Jane Street has so far reportedly argued that its trades were legitimate market arbitrage. Reuters quoted sources saying that Jane Street’s exposure to equity derivatives in India was roughly five to seven times its exposure to regular stocks. As a gauge of the mood in India, some local news headlines said that Sebi “waited until the billionaires got hurt”.
The regulator may well be quite justified in acting as it did. The bigger question remains how things were allowed to get this far in the first place.
According to figures from the Futures Industry Association (FIA), the global trade organisation representing futures, options and derivatives markets, Indian retail involvement in derivatives trading jumped from 2% in 2018 to roughly 40% in 2024.
A Sebi study in 2023 showed that 90% of Indian retail derivatives traders incurred net losses. They may have been all too vulnerable to market manipulation as well as providing attractive volumes of capital.
The amount deposited by Jane Street is said to equal the firm’s supposed excess profits from its purportedly illegitimate trades. According to Bloomberg, Sebi’s moves so far include deepening cash market trading and extending the term of derivatives.
In a statement on July 14, Sebi said it “remains committed to following due process and ensuring the integrity of the securities market”.
