| Jane Street’s success in India was said to be due to a “secret strategy.” India’s market regulator says the high-frequency trader’s big gains are on account of market manipulation. Jane Street “is not a good faith actor that can be, or deserves to be, trusted,” SEBI said in a July 3 order. It has temporarily barred Jane Street from India’s securities market and ordered to seize 48.4 billion rupees ($570 million) in “unlawful gains” made by the trader. A detailed investigation is still underway. Jane Street said it disputes SEBI’s findings and will further engage with the regulator. This is a rare action against an international trader of this size — Jane Street generated more than $2.3 billion in net revenue last year from trading in Indian equity derivatives. It will have market-wide implications. First, a quick summary of the regulator’s findings. SEBI examined Jane Street’s trades between Jan. 1, 2023 to March 31, 2025 during which the firm made 432.9 billion rupees of profits in index options and 76.87 billion rupees in losses across stock futures, index futures and cash markets. It found at least 15 instances of Jane Street making large purchases of component stocks and futures of the popular Bank Nifty Index in the morning and then selling them toward the end of trade, pushing down prices that allowed them to profit from their outstanding net short cash equivalent positions in the index options segment. While Jane Street argued that its trades were to “remove unwanted delta” or to “manage overall delta,” the regulator concluded that the trader was “undertaking an intentional, well-planned, and sinister scheme and artifice to manipulate cash and futures markets and hence manipulate the Bank Nifty Index level, to entice small investors to trade at unfavorable and misleading prices, and to the advantage of the Jane Street Group.” What does this mean for India’s markets and investors? It underscores SEBI’s determination to protect retail investors, nine out of 10 of whom make losses in derivatives, showed a study. The regulator has over the past year imposed new curbs on small investors and stock exchanges to tamp down speculative activity. This will change how large foreign and local funds view the India market opportunity. Global high-frequency trading and market-making firms from Ken Griffin’s Citadel Securities to Optiver have rushed to expand operations in India. Of the over 11,200 foreign portfolio investors in India, some 280 are engaged in algorithmic trading, according to SEBI data. I suppose many are reviewing trading strategies this Friday to ensure they clear regulatory inspection. India is the world’s largest derivatives market by contracts traded. It will hold on to that position, but volumes will no doubt continue to drop as a result of these regulatory actions. This will accentuate the competition between the leading National Stock Exchange and the smaller Bombay Stock Exchange. Lower volumes will also impact brokerages and other intermediaries in the system. Jane Street is not the only such foreign fund under investigation; other smaller players are also being scrutinized. So, this may not be the only such special edition this year. Watch: Jane Street Curbed in India After $4.3 Billion Gain India Edition on Thursday: The Cost of Making India’s Apple Dream a Reality | 
