Sebi cracks down on Jane Street, halts India trading over manipulation

By Anto Antony, Chiranjivi Chakraborty and Tom Redmond

 

Until late 2024, one of the most profitable pockets of global finance was a 24-storey tower in Gurugram, southwest of New Delhi.

 

Home to several high-speed trading firms, the blue-glass building — complete with a rooftop helipad and a bronze bull sculpture in its plaza — stood at the heart of a trading frenzy that made India the world’s largest equity derivatives market by volume. In the 12 months to March 2024, foreign funds and proprietary traders using algorithmic strategies earned over Rs 60,000 crore in profits.

 

That run, however, may be nearing an end.

 

On Friday, nearly nine months after India’s markets regulator tightened rules on options trading to protect retail investors, Sebi accused Jane Street Group — one of the market’s largest players — of manipulating prices to pocket illegal profits running into hundreds of millions of dollars.

 

Sebi imposed a temporary trading ban on the US-based firm and ordered the seizure of Rs 4,840 crore, citing “an intentional, well-planned and sinister scheme”. Jane Street, which reportedly made over Rs 33,000 crore from India in just over two years, has disputed the regulator’s findings.

 

“Sebi’s action against Jane Street is a watershed moment,” said Sonam Srivastava, fund manager at Wright Research. “It signals an aggressive stance against sophisticated global players potentially gaming the system.”

A chilling effect

High-speed trading firms such as Jane Street use a variety of strategies — from market making and arbitrage to directional bets that last from microseconds to days. But Sebi’s clampdown may spook other foreign players, many of whom were ramping up local investments and hiring in India.

 

Jane Street, Citadel Securities, Jump Trading and Optiver had all expanded their India operations in recent years, drawn by the explosive growth in the country’s options market.

 

Even before the latest order, global trading executives were reconsidering plans amid rising regulatory uncertainty. Trading activity, meanwhile, has already taken a hit — volumes fell by 70 per cent in the first five months of 2025.

 

News of the crackdown quickly rippled across global trading floors. Some traders speculated whether other foreign firms would be targeted, while others welcomed the move as a levelling of the playing field.

 

“It’s a landmark order that puts all high-frequency traders on watch,” said Anant Jatia, founder and CIO at Greenland Investment Management. “The regulator has made it clear: you’re welcome in the market, but you must play by the rules.”

Profits and concerns

Jane Street inadvertently exposed how lucrative Indian markets had become during a court case against Millennium Asset Management last year. It reportedly earned Rs 8,300 crore in 2023 from a secret options strategy — and more than Rs 19,000 crore the following year.

 

India’s options market is particularly attractive for high-frequency trading firms because of its structure — small trade sizes, high retail participation, and relatively low costs. Traders can place bets for as little as Rs 10.

 

Speed traders currently account for about 60 per cent of the volume in India’s equity derivatives market, which sees Rs 2.5 crore crore (Rs 25 trillion) in notional value traded daily. They also account for around 40 per cent of all stock trading, according to data from the National Stock Exchange.

 

“India is a bit of a victim of its own success,” said Theodore Morapedi, founder of Onyx Alpha Partners, a London-based quant recruitment firm. “US and European trading firms saw India as a high-growth alternative to crowded Western markets.”

 

But that success came at a cost.

 

According to a Sebi paper released in September 2024, nine in ten retail traders lost money in derivatives markets. Between 2021 and 2024, retail investors lost around Rs 1.75 trillion. During the same period, foreign algorithmic traders and proprietary firms made more than Rs 61,000 crore in profits.

A tower of traders

Jane Street was not alone in tapping India’s market boom.

 

In Gurugram, a city just outside New Delhi, trading giants including Citadel Securities, Tower Research Capital, Quadeye and Graviton Research Capital operate out of the iconic Two Horizon Center — a curved tower favoured for its top-tier infrastructure.

 

Citadel Securities, the firm founded by billionaire Ken Griffin, employs over 10 people in India, trading local equities and options. The company reported net income of Rs 1,470 crore in the year to March 2024 and recently made key hires to expand operations.

 

“We are committed to building a strong and long-lasting business in India,” said Vikesh Kotecha, head of Asia at Citadel Securities.

 

Tower Research, which entered India in 2006, employs over 100 staff including a crypto market making team. Israeli firm Futures First and others also occupy offices in the same tower.

 

Though Gurugram once offered tax advantages over Mumbai, that arbitrage has since ended. Still, the city remains a magnet for engineering and tech talent. Entry-level recruits earn upwards of Rs 40 lakh per annum, while senior staff can make over Rs 25 crore annually, according to recruiters. Some trading teams even enjoy party budgets of up to Rs 8 lakh per month.

 

On Friday morning, shortly after Sebi’s order became public, a fire drill at Two Horizon Center drew employees into the plaza. Traders huddled outside, speculating on the future of the business — though none were willing to speak on record.

The rise and pause of high-speed trading

High-frequency trading in India gained momentum after the 2008 financial crisis. The NSE introduced colocation services that allowed firms to place servers close to the exchange’s matching engine, enabling faster data access and execution speeds. Initially, Indian tech talent dominated the landscape.

 

But the pandemic ushered in a second wave. With millions of retail investors entering the market, volumes surged. Offshore-based firms like Jane Street significantly ramped up their India exposure.

 

Index options were a particular favourite, especially when exchanges offered daily expiries. Retail investors piled in, seeking quick gains — often with little understanding of the risks.

 

Sebi has since moved to rein in excesses. It has fixed weekly expiry days, raised minimum investment thresholds, and introduced tighter contract duration rules. In July 2025, a new valuation method for outstanding options and futures was implemented, despite industry pushback.

 

The regulator isn’t finished. Officials are now reviewing Jane Street’s trades across the Nifty 50 and Sensex indexes to assess the full extent of its alleged manipulation.

 

“People were very excited about India’s capital markets, but the tide has turned,” said Morapedi. “The regulatory headwinds have brought pessimism. Some firms now feel the best days may be behind them.”

 

(With assistance from Alex Gabriel Simon and Preeti Soni)