The recent interim order by the Securities and Exchange Board of India (SEBI) against Jane Street Group has sent ripples through the Indian financial markets, exposing a sophisticated alleged manipulation strategy that reportedly exploited the nuances of F&O expiry days. This case sheds light on the inherent vulnerabilities of derivative markets to well-orchestrated schemes and underscores SEBI’s firm resolve to safeguard market integrity.
The Expiry Day “Injection Spike” Trade by Jane Street
SEBI’s detailed interim order outlines how Jane Street, a prominent US-based global proprietary trading firm, allegedly engaged in “extended marking the close” and “intra-day index manipulation” strategies. The core of their alleged modus operandi revolved around influencing the closing prices of benchmark indices like Nifty and Bank Nifty on their respective expiry days to profit from pre-positioned, significantly larger index options contracts.
The “injection spike” refers to the sudden and artificial price movements observed, particularly in the last hour or minutes of trading on expiry days. Jane Street’s alleged strategy involved:
Aggressive Intervention in Underlying Assets:
On identified expiry days, Jane Street entities reportedly made large, directional trades in the constituent stocks of the Nifty and Bank Nifty indices, as well as in index futures. For instance, on January 17, 2024, a Bank Nifty expiry day, they allegedly made net purchases worth ₹4,370 crore in Bank Nifty constituents (cash and futures), simultaneously building massive short positions in Bank Nifty options (7.3 times the size of their long cash/futures positions).
Creating Artificial Price Pressure:
By either aggressively buying to push prices up or aggressively selling to drive them down, Jane Street allegedly created artificial demand or supply. This sudden influx of orders, especially in periods of reduced liquidity near expiry, could cause a sharp “spike” or “dip” in the index’s value.
Exploiting Options Leverage:
The critical element was the immense leverage provided by options contracts. Even a marginal, engineered movement in the underlying index’s closing price could cause their vast options positions to expire significantly “in-the-money,” leading to colossal profits. SEBI noted that while Jane Street might incur losses in the underlying cash or futures segments during these manipulative trades, the profits reaped from the options segment were disproportionately larger, making the overall scheme highly lucrative. The firm allegedly garnered over ₹43,289 crore in profits from index options on NSE between January 2023 and March 2025 across all product categories and segments.
Misleading Other Traders:
Such engineered price movements could mislead other market participants, especially retail derivatives traders, into believing genuine market sentiment, leading them to take positions based on these false signals.
SEBI identified 18 such trading sessions (15 for Bank Nifty and 3 for Nifty) where Jane Street’s “sharp, large, and aggressive interventions” allegedly distorted market prices and undermined integrity. Notably, SEBI also pointed out that despite being explicitly advised by NSE in February 2025 to cease trading patterns suggesting manipulation, Jane Street allegedly resorted to similar practices again in May 2025, demonstrating a “clear disregard/defiance” of the advisory.
Consequences as per SEBI’s Interim Order
In response to these grave allegations, SEBI has taken stringent action through an interim order, signaling its commitment to clamping down on market manipulation, irrespective of the size or global standing of the entity involved. The key consequences for Jane Street Group are:
1. Market Ban: SEBI has barred Jane Street and four of its affiliated entities (JSI Investments Pvt Ltd, JSI2 Investments Pvt Ltd, Jane Street Singapore Pte Ltd, and Jane Street Asia Trading Ltd) from accessing the Indian securities market. This means they are prohibited from buying, selling, or dealing in any securities, directly or indirectly, until further notice. This is a comprehensive prohibition.
2. Disgorgement of Unlawful Gains:
The regulator has directed Jane Street to disgorge alleged unlawful gains amounting to **₹4,843.57 crore** (approximately $570 million). This amount has been ordered to be deposited into an escrow account with a scheduled commercial bank in India. Banks, custodians, and depositories have been instructed to ensure no debits are made from Jane Street’s accounts without SEBI’s permission.
3. Winding Down Existing Positions:
While a blanket ban is in place, Jane Street has been granted a window of three months from the date of the order, or until the expiry of such contracts, whichever is earlier, to close out or square off any open positions in exchange-traded derivative contracts.
4. Cease and Desist Order: The entities have been directed to cease and desist from directly or indirectly engaging in any fraudulent, manipulative, or unfair trade practice or undertaking any activity that may be in breach of norms.
5. Continued Investigation and Opportunity for Hearing: The interim order signifies the preliminary findings of SEBI’s investigation. Jane Street has been given 21 days to submit objections and may request a personal hearing. The regulator will continue its probe, and a final order may entail further penalties or actions.
This decisive action by SEBI against a global trading giant like Jane Street underscores the regulator’s enhanced surveillance capabilities and its unwavering stance against any practice that compromises market fairness. While the firm has stated its intent to dispute SEBI’s findings, the interim order serves as a powerful deterrent, sending a clear message that India’s derivatives market, despite its high liquidity and volumes, is not a playground for manipulative strategies designed to create “injection spikes” for illicit gains. The focus on protecting retail investors from such sophisticated schemes remains paramount for the stability and credibility of the Indian financial ecosystem.
