SEBI vs Jane Street: ₹734 Cr Strategy That Rocked Indian Markets
On July 3, 2025, the Indian stock market regulator SEBI made headlines by temporarily banning the globally recognized proprietary trading firm Jane Street. The firm was accused of manipulating index options to pocket hundreds of crores in profits—allegedly using a strategic play repeated across several expiry days. This case has shaken confidence in the integrity of Indian markets and prompted a massive industry-wide introspection.
Jane Street isn’t your average trading firm. Known for its ultra-secretive algorithmic strategies, Ivy League hires, and data-heavy culture, the firm is globally active across multiple asset classes. But what exactly went wrong? Why did SEBI take such a bold action?
The Beginning: A U.S. Lawsuit That Triggered It All
Interestingly, this entire saga began outside India—in a courtroom in New York. In April 2024, Jane Street sued rival hedge fund Millennium Management, alleging theft of a proprietary options strategy. The bombshell? This strategy revolved around trading index options in Indian markets. That case was quickly settled, but it caught the attention of SEBI.
Until then, Jane Street’s activities in Indian options were under the radar. But the lawsuit exposed a billion-dollar playbook. For SEBI, that was enough to dig deeper—especially because the strategy involved instruments that fall directly under its regulation.
SEBI Investigates: Pattern on Expiry Days
By mid-2024, SEBI began reviewing Jane Street’s trading logs, particularly focused on weekly expiry days—when index options like BANKNIFTY and NIFTY settle. A pattern started to emerge:
- Jane Street would aggressively buy BANKNIFTY constituent stocks, moving the index higher.
- Simultaneously, they’d build bearish positions in options—buying puts or selling calls.
- Later in the day, they'd reverse the stock trades, pulling the index down and profiting from their earlier option positions.
SEBI believed this wasn’t just opportunistic trading—it looked like a sophisticated, repeatable manipulation pattern.
The ₹734 Crore Flashpoint: Jan 17, 2024
Among 18 expiry days SEBI investigated (Oct 2023–Mar 2025), one day stood out: January 17, 2024. That day, Jane Street allegedly made a net profit of ₹734.93 crore by exploiting expiry volatility.
How the Strategy Worked
Morning (9:15 AM – 11:47 AM): Jane Street aggressively bought shares of major banking stocks (HDFC, ICICI, Axis). This drove the BANKNIFTY index up.
At the same time, they placed opposite bets in the options market—buying puts and selling calls. These positions benefit when the index falls. Essentially, they were setting up a trap.
Afternoon (11:49 AM – 3:30 PM): Jane Street dumped their stock positions. This sell-off drove the BANKNIFTY sharply lower, especially in the final trading hour. Since it was expiry day, even a small drop created massive gains in the options they held.
This kind of last-hour move is termed as "marking the close"—a manipulation tactic where large trades in the final minutes push the price to benefit existing positions.
Why SEBI Called It Manipulation
SEBI argued Jane Street’s trades were not random. The volume, timing, and impact were too calculated. Their activities controlled both the direction of the index and their own profitability. This violated market fairness and transparency.
On Jan 17 alone, Jane Street allegedly accounted for up to 25% of the volume in major banking stocks in short bursts—enough to tilt the index. Across all 18 days investigated, SEBI estimated they made over ₹43,000 crore in options, even while losing ₹7,500 crore in stocks.
SEBI’s Final Action and Its Ripple Effects
SEBI impounded ₹4,840 crore and barred Jane Street from the Indian markets. The crackdown sent shockwaves across the trading community. Jane Street was a major liquidity provider, accounting for nearly half the volume in index options. Their exit caused a visible drop in expiry-day volumes and widened option spreads.
Industry veterans like Nithin Kamath (Zerodha) publicly supported SEBI’s move but acknowledged it will impact market efficiency in the short term.
SEBI’s Broader Measures on Weekly Options
SEBI has long been wary of the extreme volatility created by weekly options, especially on expiry days. Here are some reforms introduced recently:
- Nov 2024: Weekly options restricted to NIFTY & SENSEX only
- May 2025: New Open Interest rules using option delta, higher position limits, and stricter expiry-day margins
These changes aim to reduce speculative bursts and bring long-term stability to the derivatives segment.
Conclusion: A Wake-Up Call for Indian Markets
The Jane Street case isn’t just about one firm or a single expiry day. It highlights the growing sophistication of strategies used in Indian markets, and how oversight must evolve accordingly. SEBI’s action has sparked a larger debate on whether ultra-short-term speculative trading adds value or distorts markets.
One thing’s clear: with ₹734 crore made in just hours using a legal loophole, regulators worldwide will likely re-examine how expiry-day volatility is handled. India may just be the first market to draw the line.