Jane Street crackdown: Another reminder for retail of slim odds of winning

Sebi's probe into Jane Street's alleged market manipulation underscores how retail participants are outmatched in India's derivatives market dominated by large players

The Securities and Exchange Board of India (Sebi) order alleging market manipulation by Jane Street has served yet another stark warning to retail traders — that their odds of winning in the derivatives market are stacked against them.

 

Sebi's interim order reveals Jane Street booked a staggering gross profit of ₹43,281 crore in index options in just 21 expiry cycles.

 

One day alone – January 17, 2024 – it yielded profits of ₹735 crore, prompting detailed scrutiny by the regulator.

 

According to experts, the Sebi probe into Jane Street underscores the vulnerability of retail participants in a market dominated by sophisticated, deep-pocketed players wielding potential unfair advantages. 

 

Data has consistently shown that over 90 per cent of individual traders incur losses in derivatives. Yet they continue to account for over a third of the equity options premium turnover.

 

Experts warn that alleged practices like those attributed to Jane Street – manipulating benchmarks and leveraging massive positions – make profitable outcomes for retail traders even bleaker.

 

The Sebi order details that Jane Street's case is unusual because it involved multiple liquid stocks with high retail participation. It resulted in massive profits at the cost of other participants and retail traders. 

 

Industry experts point to inherent structural advantages enjoyed by large and deep-pocketed players like Jane Street.  

 

“High-frequency traders with access to tick-by-tick data directly at the exchange hold a significant price advantage,” said Prakarsh Gagdani, chief executive officer (CEO) of Torus Financial Market. He added, “Retail customers connect through brokers, adding latency.”

 

The order details another instance on May 15, 2025, where Jane Street allegedly ran large cash-equivalent long positions via Nifty Index options while heavily intervening in Nifty futures and constituent stock futures. 

 

Such scale of capital allows significant market influence, which small investors cannot match, said experts.

 

“Several individual traders dabble into out-of-the-money options contracts closer to their expiry on hopes that they will result in multi-fold gains. However, on the other side of the trade is often a super savvy trader like Jane Street. This invariably results in losses for small investors,” said an expert.

 

“While the derivatives market provides liquidity, this liquidity carries an extraordinary cost when demand can be manipulated left, right, and centre,” said Deven Choksey, managing director of DR Choksey Finserv. He added, “Corrective measures must follow penalising measures.”