What’s Behind SEBI’s Ban on Jane Street? A Market Dispute Deep Dive

A high-profile dispute is unfolding between the Securities and Exchange Board of India (SEBI) and Jane Street, a major US-based high-frequency trading firm, over alleged market manipulation. SEBI has barred Jane Street from participating in Indian securities markets and frozen assets worth ₹4,840 crore, accusing the firm of using complex derivatives strategies to distort the price movement of the Bank Nifty index.

Jane Street, in response, is strongly contesting the allegations, calling them unfounded and “inflammatory,” and is reportedly preparing to challenge the ban through legal channels.

Let’s take a closer look at what led to the regulatory action and how the firm is responding.

SEBI’s Allegations: A Pattern of Manipulation?

On July 5, 2025, SEBI issued a ban against Jane Street for what it described as a calculated strategy to manipulate the Bank Nifty an index tracking Indian banking stocks.

According to the regulator, Jane Street bought large quantities of Bank Nifty stocks and futures during early trading sessions to artificially lift the index. Simultaneously, it allegedly placed substantial short bets through options, profiting as the index dropped later in the day. SEBI argues that such a pattern undermines fair price discovery and investor confidence.

The investigation, which began over 2 years ago, could now expand to cover other indices and trading venues.

Jane Street Pushes Back: ‘Standard Arbitrage, Not Manipulation’

Jane Street has issued a strong internal rebuttal to SEBI’s order, stating the firm is “beyond disappointed” with the findings. In a memo shared with staff and cited by Reuters, Jane Street defended its trades as standard index arbitrage a widely accepted practice across global markets.

“Arbitrage strategies are fundamental to financial markets,” the firm stated, adding that SEBI’s interpretation disregards the role of liquidity providers and market makers.

The firm also denied claims of non-cooperation, saying it had participated in multiple discussions with both regulators and exchanges and had already adjusted its trading activity to address concerns raised earlier this year.

A Legal Battle on the Horizon

Jane Street is now exploring legal options and is likely to take its case to the Securities Appellate Tribunal (SAT) in the coming days. While the specifics of its appeal are still under wraps, it appears the firm is preparing for a rigorous legal challenge to the ban and asset freeze.

India’s Rapidly Growing Derivatives Market

India has quickly risen to become the world’s largest equity derivatives market by volume. In May 2024 alone, the country accounted for nearly 60% of global equity derivatives trades, according to the Futures Industry Association.

While this growth has increased market depth and participation, it has also raised concerns around volatility and regulatory oversight. The Jane Street case could become a critical test of how India balances innovation and integrity in its capital markets.

Read More: SEBI planning campaign to discourage people who don’t understand F&O: Pandey.

Conclusion

The ongoing dispute between SEBI and Jane Street highlights the regulatory challenges that can arise as markets evolve and become more complex. While SEBI has taken a firm stance on maintaining market integrity, Jane Street has defended its actions as legitimate arbitrage. As the matter progresses through legal channels, its outcome could set a precedent for how algorithmic and high-frequency trading is regulated in India’s fast-growing derivatives market.

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