The Securities and Exchange Board of India (SEBI), vide an ex-parte interim order dated 3 July 2025 (Order), issued under Sections 11(1), 11(4), 11B(1), and 11D of the SEBI Act, 1992, has restrained entities of the Jane Street Group, LLC (JS Group) from participating in the Indian securities market and directed the impounding of alleged unlawful gains amounting to INR 4,843.57 crore. This action follows SEBI’s investigation into prima facie manipulative trading practices by JS Group entities in the BANKNIFTY and NIFTY indices, particularly on derivative expiry days, spanning from 1 January 2023 to 31 May 2025.

Brief Background and Facts:

  1. Entities Involved: The JS Group entities named in the order are JSI Investments Private Limited , JSI2 Investments Private Limited , Jane Street Singapore Pte Ltd, and Jane Street Asia Trading Limited, all wholly owned subsidiaries of JS Group , a US-based global trading firm. These entities were identified as acting in concert, with their activities viewed as a single economic group for the purpose of the order.

 

  1. Alleged Manipulative Strategy:
  • Intra-day Index Manipulation (BANKNIFTY): SEBI identified 15 instances of alleged manipulation in BANKNIFTY index options on expiry days. On 17 January 2024, for example, during Patch I (09:15 AM to 11:46:59 AM), JS Group aggressively accumulated long positions worth INR 4,370.03 crore in BANKNIFTY constituent stocks and futures, inflating the index level. Simultaneously, they built short positions in BANKNIFTY index options, with a delta exposure rising from negative INR 7,311.19 crore to negative INR 39,426.15 crore. In Patch II, JS Group sold off INR 5,372 crore worth of these securities, exerting downward pressure on the index, aligning with their short options positions, yielding a profit of INR 734.93 crore on that day.
  • Extended Marking the Close (BANKNIFTY): On three days, including 10 July 2024, JS Group engaged in aggressive selling in the final 60 minutes of trading, notably from 14:30:00 onwards, in BANKNIFTY constituent stocks and index futures, to depress the index closing level, generating INR 560 crore in profits from options.
  • Bullish Strategy (NIFTY): On 15 May 2025, JS Group executed a bullish strategy, aggressively buying NIFTY constituent stocks and futures in the final hours (13:00 to 14:00), pushing the index upward to benefit their bullish options positions.
  1. Trading Patterns and Impact:
  • On January 17, 2024, JS Group’s net traded value in the cash segment was INR 1,851.57 Crores and INR 2,518.46 Crores in the futures segment for BANKNIFTY constituents. Their trading significantly influenced the index, with buy orders placed at or above the Last Traded Price (LTP) in Patch I and sell orders at or below LTP in Patch II, distorting price discovery.
  • Across 15 BANKNIFTY expiry days, JS Group earned INR 3,914 crore in index options profits. The total illegal gains across 18 identified days (15 BANKNIFTY and 3 NIFTY) were computed at INR 4,843.57 crore. The total profit from index options during the examination period was INR 43,289 crore, offset by losses of INR 7,208 crore in stock futures, INR 191 crore in index futures, and INR 288 crore in cash equities, resulting in a net profit of INR 36,502 crore.

 

  1. Prior Warnings: In February 2025, the National Stock Exchange (NSE), on SEBI’s instructions, cautioned JS Group against large cash-equivalent positions and questionable trading patterns. Despite responses on 6 February 2025 and 21 February 2025, JS Group continued similar practices, notably on 15 May 2025.

 

  1. Regulatory Violations: SEBI found that JS Group’s actions contravened Sections 12A(a) and (b) of the SEBI Act, 1992, and Regulations 3(a), (c), (d), and 4(1) of the SEBI (Prohibition of Fraudulent and Unfair Trade Practices relating to Securities Market) Regulations, 2003 (PFUTP Regulations). Additionally, the netting of trades in the cash market violated Regulation 20(4) of the SEBI (Foreign Portfolio Investors) Regulations, 2019.

 

SEBI’s Ex-Parte Order

  1. The Whole Time Member (WTM) of SEBI determined that JS Group’s trading activities constituted a prima facie case of market manipulation. The Order highlights the following key findings:
  • JS Group’s aggressive buying in the cash and futures markets of BANKNIFTY and NIFTY constituents, followed by rapid reversals, was designed to artificially influence index levels to benefit their larger positions in index options.
  • The trading patterns, particularly on expiry days, demonstrated intent to manipulate closing prices, impacting the settlement value of index-based contracts and misleading other market participants.
  • The scale of intervention, with significant traded volumes and a high concentration of orders at or above/below the Last Traded Price (LTP), indicated a deliberate strategy to distort price discovery.
  • JS Group violated Regulation 20(4) of the SEBI (Foreign Portfolio Investors) Regulations, 2019, by netting trades in the cash market through simultaneous intra-day buying and selling of BANKNIFTY constituent stocks without actual delivery.

 

Directions

  1. SEBI’s interim order issued the following directions to address the alleged manipulations and protect market integrity: –
  • JS Group entities are directed to jointly and severally deposit INR 4,843.57 crore, identified as unlawful gains, into an escrow account with a scheduled commercial bank in India.
  • JS Group entities are restrained from accessing the Indian securities market and prohibited from buying, selling, or otherwise dealing in securities, directly or indirectly, until further orders.
  • Banks, depositories, and custodians are instructed to ensure no debits are made from JS Group’s accounts without SEBI’s permission, though credits are allowed.
  • Stock exchanges are instructed to monitor JS Group’s future dealings closely to prevent further manipulative activities.
  • JS Group entities are ordered to cease and desist from engaging in any fraudulent, manipulative, or unfair trade practices.

The directions stipulated in the clauses above will cease to apply upon compliance with directions for the disgorgement of INR 4,843.57 crore. Further, the entities have been directed to respond and explain why further directions should not be taken against the entities.

 

MHCO Comment

This is SEBI’s strongest-ever action against a trading firm, signalling that investor protection outweighs high-frequency or quantitative trading advantages. The impounding of INR 4,843.57 crores and the restraint on securities trading reflect SEBI’s proactive approach to prevent further market abuse and ensure investor confidence.

This crackdown signals SEBI’s heightened scrutiny of foreign portfolio investors and their trading practices, emphasizing compliance with regulatory frameworks. The directive to monitor JS Group’s activities closely indicates a broader effort to curb systemic risks in the securities market. We believe this action will deter similar manipulative strategies and reinforce the importance of transparent and fair trading practices, ultimately benefiting retail investors and the broader economy.

 

Disclaimer: This legal update is based on the interim order issued by SEBI and is intended for informational purposes only. It does not constitute legal advice or a definitive interpretation of the regulatory actions taken.

The views expressed in this update are personal and should not be construed as any legal advice; please contact us for any assistance.

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