New Stock market scam Jane Street
New Stock market scam Jane Street Here’s a comprehensive 1,000‑word deep dive into the alleged “stock‑market scam” involving Jane Street in India:
1. 📰 What happened?
On July 3–4, 2025, the Securities and Exchange Board of India (SEBI) issued a sweeping interim order against Jane Street, a New York–based quantitative proprietary trading firm. It barred its affiliated entities—Jane Street Asia Trading Ltd, Jane Street Singapore Pte Ltd, JSI Investments Pvt Ltd, and JSI2 Investments Pvt Ltd—from trading in Indian markets pending investigation. SEBI also froze about ₹4,840 crore (around $567 million) allegedly stemming from unlawful trading profits (livemint.com, livemint.com).
This marks SEBI’s most aggressive action yet against a foreign trading firm and could have broad implications for derivatives markets in India.
2. Alleged manipulation strategy
a) Market structure: options & expiry
India’s equity derivatives markets—especially weekly expiry contracts on indices like BANKNIFTY and NIFTY 50—are among the busiest globally, accounting for ~60–80% of worldwide trade volume (livemint.com, wsj.com).
b) How Jane Street is alleged to have gamed the system:
SEBI identified “intra-day manipulation” on 18 expiry days, where Jane Street allegedly:
- Bought large quantities of underlying stocks or futures in the morning, artificially spiking index levels.
- Held significant short positions in index options.
- Unwound the earlier trades later in the day, pushing prices down and profiting from options gains (m.economictimes.com, livemint.com).
- “Extended marking” near market close on expiry days to influence final index levels (m.economictimes.com).
On January 17, 2024, SEBI highlights: they bought ₹4,370 crore (~$524 million) in Bank Nifty stocks/futures to boost the index, then reversed positions mid-day, earning a ₹734.93 crore profit (~$88 million) on that single day (m.economictimes.com).
Across March 2025, the firm reportedly made ₹36,502 crore (~$4.37 billion) overall, with ₹43,289 crore (≈ $5.18 billion) from options profit—and offset losses of ₹7,208 crore in futures/equities (livemint.com).
c) Why SEBI labels this “manipulation”
SEBI classified the tactics as prima facie violations of its regulations—specifically Section 12A (market manipulation) and anti-fraud provisions—because the trades appeared designed solely to distort prices without genuine economic rationale (barandbench.com).
3. Quantifying the alleged scam
- ₹4,840 crore (~$567 million) seized in escrow by SEBI as “unlawful gains” (livemint.com).
- ₹36,500 crore (~$4.3 billion) total net profit from India between Jan 2023–Mar 2025 (m.economictimes.com).
- Approximately 14 instances of intraday volume spikes flagged in SEBI’s 105‑page interim order (wsj.com).
4. Timeline: SEBI’s forensic trail
SEBI’s probe was gradual, with escalating warnings:
- April 2024: SEBI first flagged Jane Street after India‑based media reported its lawsuit against Millennium, which exposed its India‑focused strategies (m.economictimes.com).
- July–Aug 2024: NSE initiated inquiry; Jane Street responded (m.economictimes.com).
- Oct–Nov 2024: NSE reported manipulation concerns, especially around expiry days (m.economictimes.com).
- Feb 2025: SEBI issued formal caution letters advising large segmented positions be scaled back (m.economictimes.com).
- May 2025: SEBI noted violation of warnings, with continued large cash-equivalent positions (m.economictimes.com).
- July 3–4, 2025: The ban freeze and fund impoundment (m.economictimes.com).
5. Impact on markets & retail traders
- Retail traders: Lost approximately $21–21.7 billion cumulatively over the three years preceding March 2024 (reuters.com)(reuters.com, marketwatch.com).
- Long-term signals: Analysts generally praised SEBI’s crackdown, saying it enhances market integrity—even though volumes may dip temporarily .
6. Jane Street’s response
Jane Street has firmly denied wrongdoing, responding via email and official statements that it’s “committed to regulatory compliance.” It plans to challenge SEBI’s interim order within the 21‑day window, including filing objections and possibly appealing to the Securities Appellate Tribunal (reuters.com).
Its defense centers on classifying its trading activities as risk management rather than manipulation .New Stock market scam Jane Street
7. Legal/regulatory context
- SEBI’s interim action is based on prima facie evidence; the final investigation might lead to appeals or full hearings.
- The seizure of alleged illicit profits is legally permitted under SEBI’s charter; final disgorgement could be up to three times the amount under Indian law (reuters.com, ft.com).
- Investigators are reviewing trades across more expiry cycles, other indexes, and other exchanges—suggesting the probe may expand significantly (livemint.com).
8. Broader ramifications
For India:
- Signals a zero‑tolerance stance toward manipulation by deep‑pocketed prop firms.
- May prompt new safeguards: cross‑segment surveillance, expiry‑day limits, and floor‑based lot/expiry reforms (m.economictimes.com).
- Retail traders might regain confidence—or face volatility while trading volumes adjust.
For global proprietary trading firms:
- Firms with high‑volume, expiry‑day trading may face heightened scrutiny globally.
- SEBI’s actions may serve as a precedent for other jurisdictions.
Geopolitical undertones:
- The timing—amid sensitive U.S.–India trade negotiations—has raised speculation that it may be driven partly by political strategy (marketwatch.com).
9. Is this a “scam”?
New Stock market scam Jane Street Though widely described as a scam, legally, the term refers to intentional deceit producing measurable harm. SEBI’s interim order presents a compelling case based on trading patterns, profit seizures, stock impact, and alleged contravention of fair trade regulations.
An interim order isn’t a final judgment—but SEBI’s evidence spans:
- Systematic duration: 2023–2025
- Quantification: ₹36,500 crore profits; ₹43,289 crore options gains
- Identifiable tactics: 18 expiry days, intra-day reversals, expiry-time manipulations
- Wider damage: ₹21 billion in retail losses; market swings
- Strong regulatory view: Warnings ignored; manipulative playbook
While Jane Street asserts its approach was for risk management, it will be up to the Indian judiciary—and any eventual appellate rulings—to determine whether it amounts to fraud or regulation-violating behavior.
10. What’s next?
- Jane Street has 21 days (until ~July 24, 2025) to file objections, request hearings or appeal (m.economictimes.com, marketwatch.com, wsj.com).
- SEBI will deepen the probe—potentially spanning more expiry cycles, indexes & exchanges (reuters.com).
- Market reforms: Expect new expiry-day volume controls, cross-segment checks per Mint and Reuters (m.economictimes.com).
- Global risk: Other markets may watch India’s lead in policing high-frequency derivatives activity.
✍️ Conclusion
SEBI’s interim ban and escrow freeze paint one of the most significant episodes of potential market manipulation by a global quant firm. If SEBI’s allegations of expiry‑day gaming and coordinated trades are upheld, the ₹36,500–₹43,289 crore profits could indeed constitute a major scam, done at the expense of retail investors and market integrity.
The scale—multi‑year, multi-billion‑dollar, cross‑segment manipulation—elevates this from a trading controversy to a full-blown regulatory and legal crisis for Jane Street. Their forthcoming defense and any judicial outcomes will be pivotal—not just for Jane Street, but for how algorithmic and proprietary trading firms operate in major emerging markets.
Let me know if you’d like a more in-depth legal analysis, a breakdown of expiry-day strategies, or how this situation compares to other derivatives-era controversies.