In a strong and rare action, India’s capital markets regulator, the Securities and Exchange Board of India (Sebi), has banned Jane Street Group, a major US-based proprietary trading firm, from operating in the Indian securities market.

This means Jane Street can no longer buy or sell securities in India—either directly or indirectly—while Sebi investigates alleged market manipulation.

₹4,840 Crore Frozen in Jane Street Accounts

Sebi has also frozen funds worth ₹4,840 crore (approximately $567 million) in the company’s Indian accounts. The regulator believes the money came from manipulative trades in equity derivatives, especially those linked to the Nifty 50 index.

In its interim order, Sebi stated, “Entities are restrained from accessing the securities market and are further prohibited from buying, selling or otherwise dealing in securities, directly or indirectly.”

The regulator added, “This is an unusual case where prima facie, multiple liquid stocks with high retail participation have together been manipulated to facilitate the manipulation of the index options market.”

Complaints Sparked the Investigation

Initially, market participants raised red flags about unusual trading patterns. These complaints prompted Sebi to issue a warning to Jane Street in February 2024.

However, after several months of investigation, Sebi found signs of possible manipulation involving retail-heavy stocks, which helped the firm make massive profits at the expense of other traders.

Sebi Cracks Down on Market Abuse

To ensure compliance, Sebi has directed all banks and financial institutions not to allow any withdrawals from Jane Street’s accounts without prior approval. At the same time, the regulator will watch all of Jane Street’s open positions in Indian markets until the probe is completed.

Jane Street Responds to Allegations

In response, Jane Street has denied any wrongdoing. The firm said in a statement to Reuters, “Jane Street is committed to operating in compliance with all regulations in the regions we operate around the world.” It added that it disputes the findings in the Sebi order and intends to engage further with the regulator.

Jane Street is known globally for its algorithmic and high-frequency trading. The firm operates in multiple financial markets, including equities, fixed income, and ETFs.

Sebi Increases Oversight as Global Trading Grows

This case reflects a broader trend: Sebi is tightening its oversight of foreign trading firms, especially as India’s derivatives market rapidly expands. Currently, India ranks among the largest derivatives markets globally. Many foreign proprietary trading firms have entered the space, making strict monitoring essential. Sebi’s focus is not only on protecting market integrity but also on safeguarding retail investors, who often suffer the most from manipulative practices.

Market Impact and Industry Concerns

Experts say Sebi’s action could send a strong message to foreign trading firms. It signals that regulatory loopholes will no longer go unnoticed. According to data from the National Stock Exchange (NSE), index options make up over 90% of daily derivative turnover. Hence, any manipulation in this segment could cause large-scale disruption. Market analysts believe this case could lead to stricter rules around algorithmic trading and foreign fund flows in the future.