Jane Street Probe Goes Global: SEBI Shares Data with U.S. SEC Amid Manipulation Allegations

U.S. regulators have begun examining a major case involving Jane Street, a global trading firm, which is currently under investigation in India. The U.S. Securities and Exchange Commission (SEC) has reached out to the Securities and Exchange Board of India (SEBI) for details of its ongoing probe into alleged market manipulation by the firm. SEBI, following international cooperation guidelines under IOSCO, has shared specific responses to the SEC's queries.

The Background

In early July, SEBI issued an interim order that temporarily barred Jane Street from trading in Indian markets. It also asked the firm to return ₹4,843 crore, which the regulator believes were profits made through manipulative trades in Bank Nifty index options. SEBI claims that Jane Street's strategy involved placing large buy orders early in the day to push up prices, followed by strong sell orders closer to expiry—causing market distortions and losses for other traders, especially retail participants.

Jane Street denied the charges but quickly deposited the disputed amount into an escrow account. Following this, SEBI lifted the trading ban on July 21, but with conditions. Stock exchanges have now been directed to monitor the firm’s activities closely.

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Concerns Over SEBI's Handling

Although SEBI has claimed to use advanced technology to monitor trades, critics have questioned the delay in this case. The regulator only began examining Jane Street’s activity after a court case in the U.S. brought the firm into the spotlight in April 2024. NSE submitted a report in November that flagged unusual patterns, but it took SEBI several more months to act.

Interestingly, the order focuses only on trades made on NSE, even though Jane Street has been active on other platforms like BSE and MSEI. This narrow focus raises doubts about whether the investigation fully covered all trading activity across Indian exchanges.

Larger Issues at Stake

Jane Street operates through JSI Investments and a second unit, JSI2, both of which have substantial capital registered in India but little visible presence on the ground. Their listed address is a shared office space, and there appears to be minimal local staffing. This has sparked concern among market watchers, who say foreign firms should meet stricter local norms.

SEBI’s past struggles to prove allegations in high-profile cases, including the NSE co-location episode, raise the stakes further. If it fails to present a solid case this time, the outcome could dent its credibility, especially with international regulators now watching closely.

Political Silence and Structural Gaps

What’s even more troubling is the lack of meaningful discussion in Parliament. Despite the potential impact on markets and investor trust, lawmakers have shown little interest in questioning regulatory performance. The bigger issue—India’s shallow derivatives market and its risk to retail traders—also remains unaddressed.

SEBI’s data reveals that over 90% of retail traders lost money in F&O markets in FY24-25, but no structural reforms have been made. Many believe this environment allows large institutional players to profit while retail investors take the hit.

Conclusion

The Jane Street investigation is about more than just one firm’s trading strategy. It highlights weaknesses in oversight, gaps in enforcement, and the need for deeper reforms. With the SEC now involved, the case has gone beyond India’s borders. For SEBI, the challenge now is to back its actions with solid evidence—or risk losing face globally.