SEBI responds to US regulator's queries in Jane Street market manipulation case: Report

The US Securities and Exchange Commission (SEC) has sought information from India's market regulator SEBI about its ongoing probe into Jane Street over alleged manipulation of the derivatives market, reported Economic Times, citing people familiar with the development.

Sandeep Parekh, managing partner of Finsec Law Advisors, said that a regulator which is a signatory to the International Organization of Securities Commissions (IOSCO) pact is obliged to share any information requested by any other signatory.

IOSCO is a grouping of national securities regulators.

SEBI invoked its powers under the prohibition of unfair trade practices (PFUTP) regulations to accuse Jane Street of manipulating the Bank NIFTY Index by driving up prices with heavy buying in the morning and pushing them down later through selling. SEBI said this pattern incurred nearly ₹200 crore in intraday losses on underlying trades but generated outsized gains in options positions linked to the index.

According to SEBI, this lacked a standalone economic rationale and was designed to artificially move index levels to benefit Jane Street’s derivatives positions.

The regulator said this hurt retail investors while Jane Street made illegal gains.

On July 3, SEBI imposed a trading ban on the firm and ordered it to return ₹4,844 crore in alleged illegal gains. Jane Street deposited the entire amount in an escrow account and, following this, the regulator lifted the ban with certain conditions on July 21.

The firm has denied wrongdoing and is preparing a formal rebuttal, but has not yet challenged SEBI’s findings in court.

SEBI has informed Jane Street’s legal representatives about the hearing dates in the matter. The firm had been given 21 days to respond to the interim findings.

Jane Street, which operates high-frequency trading strategies using proprietary algorithms across global financial centres, has told the regulator it reserves the right to pursue legal and equitable remedies.