Green light for HFT firm Jane Street to re-enter domestic markets

But bourses to closely monitor company's future dealings on ongoing basis

High-frequency trading (HFT) firm Jane Street has been allowed to re-enter the domestic markets after it fulfilled the Securities and Exchange Board of India’s (Sebi’s) direction to deposit alleged “unlawful gains” of ₹4,844 crore in an escrow account before July 14.

 

 According to sources, Sebi last week informed Jane Street via email that the ban imposed on the New York-based trading firm had been lifted. “The July 3 interim order clearly states that upon deposit compliance, the restriction on accessing the securities market will cease to apply. However, this has been formally communicated to Jane Street by Sebi through an email,” said a person with knowledge of the development. Sources said custodians, depositories, and stock exchanges, too, have been informed about the lifting of the ban. 

 

An email sent to Sebi and Jane Street remained unanswered until the time of going to press.

 

However, it won’t be business as usual for the HFT titan, which has raked in profits of ₹43,289 crore just in index options between January 2023 and March 2025. Both the National Stock Exchange and BSE have been tasked with keeping a close tab on Jane Street’s future dealings and positions on an ongoing basis.  

 

Moreover, the trading firm and its associates have been directed to refrain from “any manipulative activities,” especially those patterns identified in Sebi’s July 3 interim order. These directions will remain in place until the markets regulator completes its full investigation.

 

Sources said Jane Street representatives also met with Sebi officials over the past week. Earlier, the trading powerhouse had indicated it did not intend to start options trading immediately.

 

The Sebi order’s revelations about Jane Street’s trading strategy are seen as hindering its future trading prowess. The regulator’s detailed description of the firm's tactics could make it challenging for Jane Street to execute similar strategies with the same level of success, said experts.

 

According to the Sebi order, Jane Street employed a two-part strategy: it aggressively bought Bank Nifty constituent stocks in both cash and futures segments to artificially inflate the index. It later unwound those positions while holding large short positions in index options, profiting from the subsequent decline.

 

Jane Street maintains that its trades were part of a standard “index arbitrage” strategy —  exploiting price differences between related instruments to provide liquidity and maintain market efficiency.

 

Meanwhile, Sebi has expanded its probe to check if indices other than the Bank Nifty index were manipulated by Jane Street and even other HFT firms. The investigations and proceedings could take several months.

 

Experts are uncertain about the future market dynamics, even as Jane Street potentially returns to trading. Since the ban on Jane Street,  the trading volumes in the futures and options segment – where the US-based firm was a big volume generator — have dropped 20 per cent.

 

“While Jane Street has regained access to the market, it may have to adjust its high-risk strategies. This could give rival HFT firms an edge over it. Already, the Wall Street firm is not raking in the same profits it used to earlier,” said an official with an HFT firm.