Jane Street returns to Indian markets: Why did SEBI ban it and what happens next?

Why was Jane Street banned?

Earlier in July, the Securities and Exchange Board of India (SEBI) accused Jane Street of executing a “sinister scheme” to manipulate stocks and derivatives in India, banning its four group entities from the markets and ordering disgorgement of alleged unlawful gains amounting to nearly ₹4,844 crore.

In a 96-page interim order, SEBI detailed that between January 2023 and March 2025, Jane Street’s entities earned over ₹43,289 crore in profits trading index options. The regulator alleged that on at least 15 BANKNIFTY options expiry days, the firm used what it called an “Intra-day Index Manipulation Strategy”.

The strategy involved aggressively buying large quantities of BANKNIFTY constituent stocks and futures contracts early in the session to temporarily push up the banking index, followed by aggressive selling later in the day to reverse those trades. 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, thereby distorting fair price discovery and harming other market participants.

The investigation was reportedly triggered by a lawsuit Jane Street launched last year against Millennium Management and two former traders accused of stealing a trading strategy that revolved around Indian options trading.

Market impact of the ban

The National Stock Exchange of India (NSE) data showed index options premium turnover slumped by nearly 36% over two weeks. India’s weekly equity index options volumes fell by a third.

Founded in 2000, Jane Street is one of the world’s largest quantitative trading firms, generating $20.5 billion in revenues last year. The firm has over 3,000 staff globally and operates in India through two local units and two Asian foreign portfolio investor entities. It entered the Indian market in December 2020 and mainly trades BANKNIFTY options, among the world’s most actively traded contracts.

How has Jane Street responded?

Jane Street disputed the findings and said it is "committed to operating in compliance with all regulations in the regions we operate around the world."

“It’s deeply upsetting to see the firm mischaracterised this way,” the memo stated, adding that Jane Street had paused trading whenever exchanges raised concerns and subsequently modified strategies to address their “preferences”.

Jane Street told SEBI it had undertaken the deposit “without prejudice to their rights and remedies which remain available to them in law and equity,” the statement said.

The firm has also requested SEBI to lift “certain conditional restrictions” imposed under the interim order, following the creation of the escrow account.

“This request is currently under examination by SEBI in accordance with the directions of the interim order,” the regulator had said.

What has happened now?

SEBI informed Jane Street that its trading ban had been lifted after the firm deposited ₹4,844 crore in an escrow account before the July 14 deadline, Business Standard reported. SEBI has directed NSE and BSE to closely monitor Jane Street’s future trading activity and instructed the firm to avoid manipulative patterns flagged in its interim order.

Shares of Indian capital market service providers, including BSE and Central Depository Services, rallied on Monday amid news of Jane Street’s re-entry.

What lies ahead?

While Jane Street has been allowed to resume trading, its return could be a bit low-key as the firm will not trade in options, reported Reuters, citing a person familiar with the matter.

"While the firm has been allowed to resume trading in India, it has given an undertaking to SEBI that it will not trade in options. The firm also does not intend to trade in cash till it has explained its trades to SEBI," Reuters quoted the source as saying.