Sebi to tighten derivatives surveillance after Jane Street crackdown

Jane Street action just the start, says Sebi chief amid wider data-driven probe

The Securities and Exchange Board of India (Sebi) is set to strengthen its surveillance measures for the derivatives market, Chairman Tuhin Kanta Pandey announced at an event on Monday.

 

Pandey emphasised that Sebi’s action against Jane Street was a surveillance matter and that efforts will continue at both the exchange and regulatory levels.

 

When asked whether Sebi is investigating other high-frequency traders similar to Jane Street, Pandey said he does not believe many other companies are involved, though he did not elaborate further.

 

The Sebi chief also said that strong enforcement and surveillance are crucial in preventing market manipulation. Regarding the investigation into Jane Street, Pandey explained that the action was taken after extensive analytical work based on a high volume of data.

 

 

“Manipulative practices can be executed by various players in different ways. There is no single method to assess these practices,” Pandey observed. 

 

Addressing the possibility of Jane Street challenging the order, Pandey reiterated that Sebi has all the necessary powers to investigate and act against fraudulent practices.

 

He cited the Prohibition of Fraudulent and Unfair Trade Practices regulations, which clearly prohibit manipulative and fraudulent activities in the market. He added that while everyone has the right to challenge regulatory actions, Sebi has already outlined its interim measures, and the order speaks for itself.

 

In an interim order dated July 3, Sebi ordered the impounding of ₹4,844 crore in “unlawful gains” made by Jane Street, a US-based proprietary trading firm. This marks the highest-ever impounding by the regulator.

 

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

 

The 105-page Sebi order also notes that Jane Street allegedly established entities in India to bypass foreign portfolio investor regulations.

 

Pandey’s comments came on the sidelines of an event launching a new feature in the investor apps of Central Depository Services and National Securities Depository. The new feature allows retail shareholders to access proxy advisor recommendations while voting on company resolutions through the e-voting system.