By Nesil Staney
The Securities and Exchange Board of India’s (SEBI) crackdown on Jane Street may just be the tip of the iceberg, with traders and fund managers alleging that multiple large algorithmic trading firms — both foreign and domestic — colluded to manipulate Indian indices, causing steep losses for investors. While SEBI has already taken stringent action against the US-headquartered market maker, sources said at least two other large algo-trading firms may have been practising similar strategies.
“There was definitely collusion among two or more large algo-trading firms to move the Nifty in clear, predetermined directions,” said the owner of one of India’s largest proprietary trading desks.
Many domestic high-net-worth (HNI) traders and family offices (FOs) incurred heavy losses in options trading on May 15, when a sharp expiry-day move caught large traders off guard, he said, citing the episode as an example.
His view was echoed by a large foreign hedge fund manager, who claimed that two or more foreign institutional traders may have deployed index-manipulation algorithms in coordination with Jane Street. On May 30, FE reported that SEBI had begun investigating Jane Street’s index manipulation strategies following complaints from other institutional investors.
SEBI’s action came after several fund managers and brokerages approached the regulator earlier this year with detailed evidence of manipulation in India’s options market, allegedly involving Jane Street. On Friday, SEBI directed banks to block debits from Jane-linked accounts without prior approval. It also ordered the seizure of `4,843 crore — the amount SEBI claims the firm made through unlawful gains.
“The extent of unlawful gains is massively understated, possibly because SEBI could only catch that much,” said a Dubai-based foreign portfolio investor.
According to the hedge fund manager, who had also approached SEBI and the Finance Ministry, benchmark indices—primarily the Nifty—were being manipulated into two constructs on expiry days: a “quiet construct” and a “volatile construct,” both created by algorithms using rapid price reversals.
SEBI has asked the NSE and BSE to furnish all trade data related to Jane Street for the past three years, sources said. In January 2025, the NSE launched a probe into Jane’s derivatives trades and potential market manipulation. Nuvama, the compliance partner for Jane Street India (JSI), argued there was no human intervention or malafide intent, as the trades were entirely algorithm-driven. Satisfied with the response, NSE closed the investigation on April 30.
“The whole of April was extensively manipulated, despite the macroeconomic situation being very volatile,” said the Dubai-based fund manager. In May, SEBI reopened its investigation into Jane’s derivatives trades.
Jane Street and JSI came under the spotlight in 2023 during a New York court battle with $72-billion hedge fund Millennium Management over a ‘stolen strategy’ designed specifically for India. The lawsuit revealed that Jane earned $1 billion from trading in India that year, contributing to its global net revenue of $10.6 billion.
In 2024, Jane’s revenue from India more than doubled to $2.3 billion, primarily from options trading. Its global revenue crossed $20 billion — surpassing Wall Street giants such as Citigroup and Bank of America. People familiar with the matter said Citadel Securities and Optiver each earned comparatively modest profits of around $300 million from Indian options trading.
“Ideally, the investigation should have commenced 1.5 years back”, said the hedge fund manager. “It’s taken years of toil for India to have built its reputation for fairness. This action from SEBI would go a long way in reinstating that,” he said.
The SEBI (Prohibition of Fraudulent and Unfair Trade Practices) Act, commonly known as the PFUTP regulations, is a key framework from SEBI to maintain market integrity and protect investors. The PFUTP Act aims to foster transparency, fairness, and confidence in India’s capital markets.