By Nesil Staney
Jane Street and its four affiliates (JS) were capable of moving the Nifty index by as much as 2% with ease, said a Dubai-based hedge fund’s president, Mayank Bansal, who had raised red-flags and was in touch with Sebi officials since December 2024. He clearly outlines several manipulative strategies executed by the US-based market mover.
“It takes only `750 crore margin to take a `5,000 crore exposure, to buy forward contracts of the same expiry to move the Nifty by 2% on the upside on a volatile expiry. The beauty of forwards is that while the delta has been hit in the market, creating the up move, one doesn’t need to square it off at day-end since it auto expires on the expiry day,” he said.
Bansal made elaborate power-point presentations to the regulator which he has shared with FE. He also said that he exchanged email with Sebi’s whole time member Ananth Narayan with proof of rampant index manipulations on dozens of derivative expiry days since mid-2023.
In one such email sent on December 17, 2024, to Sebi officials, he noted “in no market, in no asset class, world over, do IVs (implied volatility) move up before the move comes or go down before the quiet ensues. It is tell-tale classic manipulation with options positions being built beforehand.”
His narrative of the chronology of how JS started manipulating the index in India over time is quite interesting. The firm started creating quiet index expiries as early as September 2023. Over time, it kicked off violent expiries by first moving the Nifty Midcap Select, which was least liquid. As confidence grew, JS began moving Bank Nifty, and finally Nifty.
He added that one of Narayan’s replies to his emails assured him that the regulator was looking closely at the matter. Throughout his emails, Bansal described a pattern where JS created either unusually quiet or massively volatile expiries. Sebi started intensive investigation post December 2024, only after institutional investors such as Bansal, complained.
To avoid consumption of the entire margin by the short-puts, JS simply went long ITM (in the money) calls. It avoided puts, thereby hitting the required delta. This would consume margin equivalent to just the long ITM call premium.
As a result, a US-based firm could move the market with much less than even Rs 750 crore, while it had billions of dollars for trading. On an expiry day, the short OI (open interest) in options keeps increasing as the day passes. The firm creates a series of small-sized moves on the upside such that stop losses are triggered for short-calls traders, who would frantically cut positions.
As opposed to violent expiries, where it can get away by creating the move with forwards or futures, for a quiet expiry where it settles the market at a given strike, it will need to enter the cash market in the last half an hour. It can try to get cash around the strike price using futures or forwards till before 3 pm. Post 3 pm, to settle at strike on expiry, it would need to enter the cash segment.
Bansal’s most recent mail to Narayan pointed at the May 15 Nifty expiry, which he classifies as a volatile expiry, hallmarked by options becoming irrationally expensive (as measured by implied volatility) and the later half of the day seeing a steep move. Notably, the May 15 expiry is also mentioned in the Sebi order and served as a trigger for the interim order. He added that the interim order of impounding `4,800 crore would be a small part of what the final order is likely to be.
Much of the firm’s unlawful gains were from losses incurred by the retail segment. Sebi mentions that of the three key segments in options – retail, proprietary and FPI – only retail was loss-making. It incurred losses to the tune of `55,000 crore for FY 24. Of this, at least `25,000 crore were caused by JS alone, Bansal said.