One of the most complex enforcement actions in recent years was enacted by the Securities and Exchange Board of India (SEBI) against U.S. high-frequency trader Jane Street. The billions’ worth of lucrative derivatives activity posed a real test for SEBI, which had to keep pace with some of the most sophisticated global trading strategies while operating in its dual capacities as a market developer and regulator.

The Early Red-Flag Period and Later Dismantling of Strategy

Suspicious activity by Jane Street was noticed even before SEBI began its formal investigation in April 2024. As early as November 2023, the NSE was providing SEBI with “data and analysis” concerning the trader, following a surveillance alert.

By late 2023, SEBI had convened an informal inquiry into abnormal trade patterns but quickly ran into a wall of complexity. Trades conducted by high-frequency firms generate such vast volumes of data that it becomes difficult to separate aggressive-but-legal trading strategies from manipulative behavior.

The delay proved costly for small investors. Between 2021 and March 2024, retail traders lost $21 billion trading derivatives, with low-income investors making up 76% of participants in this high-risk segment.

Retail Boom Meets Regulatory Hesitation

India’s derivatives market took off after the pandemic. In 2023, the notional value of derivatives traded in the country was 422 times that of the cash market—far above the global average of 5–15 times.

While regulators worried about the entry of unsophisticated investors into options trading, SEBI stopped short of imposing harsher restrictions such as income thresholds. Officials feared such measures would “spook markets” or appear as though the regulator was raising a white flag. Instead, SEBI opted for softer interventions, such as requiring risk disclaimers on broker platforms.

The Charges Against Jane Street

In July 2025, SEBI issued one of its toughest actions against a foreign investor—a 105-page interim order barring Jane Street from Indian markets. The order alleged that Jane Street manipulated the cash, futures, and derivatives linked to a banking index through coordinated trades.

The firm allegedly built large long positions in underlying stocks, driving the index higher, while simultaneously shorting index derivatives. It would then liquidate the stock positions, pushing prices down and profiting from the short positions.

According to SEBI, these tactics yielded $567 million in “unlawful gains” between January 2023 and March 2025—part of the $4.23 billion Jane Street made in India during that period.

Jane Street has denied wrongdoing, describing the trades as “basic index arbitrage.” The company has placed the disputed $567 million into escrow to regain market access, though it has not resumed trading in India.

The Intricacy of Proving Market Manipulation

The biggest challenge in such cases is proving intent. “You have to show not just impact, but intent,” remarked Sumit Agrawal, a former SEBI official, noting that such investigations can take around two years in larger markets.

Jane Street’s case is further complicated by its operations across multiple jurisdictions—structures not typically seen in India.

High-Frequency Traders and Exchange Incentives

Jane Street was most active during a period when NSE was aggressively expanding its derivatives business. Options contributed to 76% of NSE’s transaction fees in the year to March 2024. The exchange also hosted several industry meetings, including one in October 2024 attended by Jane Street’s India executives, where plans to triple co-location capacity for HFTs were discussed.

NSE has stated that from April 2024 it began issuing “detailed surveillance inputs” on Jane Street, and that such meetings were standard practice “to address queries and issues within regulatory boundaries.”

SEBI’s Cooling Measures and Market Shift

In late 2024, SEBI tried to rein in speculative activity in derivatives trading by raising minimum contract sizes. Ananth Narayan, SEBI’s whole-time member who spearheaded the Jane Street probe, told the media in July 2025 that these measures helped reduce market froth to more moderate levels.

Expert Commentary

• Ananth Narayan, SEBI Whole-Time Member:
  “Derivatives are a double-edged sword. They can provide liquidity and hedging opportunities, but unchecked speculation erodes investor wealth and market credibility.”
• G. Mahalingam, Former SEBI Executive Director:
  “The index derivatives boom happened without adequate guardrails. This allowed markets to veer into unfettered speculation.”
• Sumit Agrawal, Regstreet Law Advisors:
  “In enforcement, you need to establish a clear link between actions and intent. Without this, orders are vulnerable to being overturned in court.”
• Amit Tandon, Institutional Investor Advisory Services:
  “The case underscores the tension in SEBI’s dual mandate—to foster market growth and ensure fair play. Delays in action can erode trust among retail participants.”

Public Reaction

For some retail traders, the penalties were too little, too late. Mumbai cab driver and former derivatives trader Govind Jha said he stopped trading for a month out of frustration: “They banned them and then allowed them back. What’s the point if big players can just pay and return?”

FAQs

Q: Who is Jane Street?
A: A U.S.-based proprietary trading firm known for quantitative and high-frequency strategies, active in global derivatives and ETF markets.

Q: What exactly did SEBI accuse Jane Street of?
A: Coordinated buying and selling in cash, futures, and options markets to influence index prices and profit from derivatives positions—a form of alleged manipulation.

Q: How much money was involved?
A: SEBI says Jane Street made $4.23 billion from Indian derivative trades between Jan 2023 and Mar 2025, of which $567 million are alleged “unlawful gains.”

Q: Why did SEBI take so long to act?
A: The complexity of high-frequency data, cross-border structures, and the legal challenge of proving intent slowed the process.

Q: What has changed in India’s derivatives market since?
A: SEBI introduced cooling measures in late 2024, raising contract sizes and tightening retail access, leading to slower derivatives growth.

Q: Is Jane Street trading in India now?
A: No. The firm regained legal access after placing $567 million in escrow but has not resumed operations.

Conclusion

The Jane Street episode exposed the regulatory lag in India’s fast-evolving derivatives market. It highlighted SEBI’s struggle to balance market development with investor protection and the difficulty of policing advanced trading strategies in real time. Whether the case leads to structural reforms—or simply becomes another chapter in India’s long list of market controversies—will depend on the regulator’s ability to adapt and enforce rules before speculative excess turns into systemic risk.