Zero tolerance for market manipulation: Sebi chief on Jane Street case

Tuhin Kanta Pandey, Chairman, the Securities and Exchange Board of India (Sebi), warned on Saturday that market manipulations, such as those allegedly committed by Jane Street, will not be tolerated. 

 

In a significant move against a high-frequency trading firm, Sebi has barred New York-based Jane Street and its group companies from the domestic market for allegedly manipulating the Nifty Bank index.

 

In an interim order dated July 3, Sebi ordered the impounding of Rs 4,844 crore in "unlawful gains" made by the US trading firm. This marks the highest-ever impounding by the regulator.

 

“Surveillance is in place, we have effectively increased the number of personnel in surveillance both at the exchange level as well as the Sebi level. So, this is basically a surveillance issue and we are keeping track more closely,” said Pandey speaking on the sidelines of an event by the Bombay Chartered Accountants’ Society.

 

When asked about potential probes into other foreign players, the Sebi Chairman emphasised, "We are now looking at everything. Market manipulation will not be tolerated."

 

The 105-page Sebi order notes that Jane Street allegedly established entities in India to bypass Foreign Portfolio Investor (FPI) regulations. Several high-frequency trading firms (HFTs) have recently set up offices in India.

 

A final order in the matter is expected in a few months, as the regulator continues to investigate other indices and market segments where Jane Street may have deployed similar strategies. While the current order is limited to a few strategies undertaken by the high-frequency trading firm in Bank Nifty, Sebi is also investigating activities in other indices, such as the Nifty 50 and the BSE Sensex.

 

The current order is based on only 18 days of Bank Nifty index manipulation and three days of Nifty index manipulation on expiry days. Sources indicate that the market regulator is investigating other expiry days across exchanges to identify any potential patterns.

 

Furthermore, the market regulator has strengthened intraday surveillance, particularly regarding position limits.