Indian tax authorities and market regulators are considering expanding their investigation into United States-based trading giant Jane Street Group to include allegations of tax evasion. This follows an existing investigation into the firm’s alleged involvement in price rigging in the Bombay Stock Exchange’s Sensex. Media reports suggest that the Securities and Exchange Board of India (SEBI) has already seized assets worth 48.43 billion rupees (approximately $570 million) and banned four Jane Street-related entities from operating in the market for allegedly manipulating trade in the National Stock Exchange (NSE).
SEBI’s actions have stirred up turmoil in Indian markets, prompting concerns about the efficacy of regulatory surveillance and the protection of investors in the world’s largest options trading market. Following SEBI’s order, trading volumes in India’s weekly equity index options have reportedly dropped by around a third.
The market for equity options allows investors to buy or sell stocks at predetermined prices and dates. As India’s market has grown to handle more than half of all global options trades, retail investors have entered the fray. However, the rapid growth has been marred by questions of price manipulation—an issue that remained largely unaddressed until it was brought to the forefront in a New York court case in April 2024, where Jane Street accused its rival, Millennium Partners, of stealing its algorithms to trade in the Indian options market.
In an interim order issued on July 3, SEBI provided substantial evidence suggesting that Jane Street had engaged in manipulation of securities and index benchmarks without any apparent economic justification. The regulator accused Jane Street of accumulating large positions in stocks that are part of the NSE’s Bank Index and of building significant short positions in index options at the start of trading. As the market closed, Jane Street would reportedly reverse these trades to depress the index and reap large profits from options trading.
The complex trades were obscured by some of Jane Street’s offshore entities. Legal experts note that while lawyers may contest jurisdiction issues, SEBI can intervene when Indian securities are involved. Jane Street has disputed SEBI’s findings and has engaged lawyers to contest the allegations, posting the 48.43 billion rupees fine with an escrow account pending the investigation’s outcome.
The full investigation could take between eight to 24 months, particularly in complex manipulation cases. Nevertheless, the probe is part of a larger examination of Jane Street’s activities and the adequacy of regulatory measures in curbing such trades and protecting retail investors. Retail investors have been drawn to the booming options market, seduced by the prospect of quick profits but are often unprepared for the risks involved.
Experts emphasize that SEBI has a capable surveillance system and can monitor market activities in a timely manner. The interim order is based on trades conducted by Jane Street between January 1, 2023, and March 31, 2025, with retail investors potentially suffering significant losses during this period. SEBI’s efforts to curb excessive speculation in the options market, such as implementing tighter spreads and higher margins, reflect a policy shift toward greater investor protection.
However, provoking price manipulation can be challenging due to the need to establish intent, a point of contention among experts. Jane Street has maintained that it was only engaging in legitimate trading practices and that SEBI’s allegations are baseless. The complexity of proving manipulation could result in pushback against regulatory actions, with potential reputational and global implications for the firm should SEBI’s investigation yield concrete evidence of wrongdoing.
Source: https://www.aljazeera.com/economy/2025/7/18/indias-ban-on-jane-street-raises-concerns-over-regulator-role?traffic_source=rss
