In a case that has rattled investor confidence and raised critical questions about regulatory oversight, global trading firm Jane Street has been accused of manipulating Indian derivatives markets to the tune of ₹36,671 crore between January 2023 and March 2025. The magnitude of the alleged wrongdoing, which stretches across 21 expiry days and involves a web of intricate trades, is not just unprecedented in scale—it’s a red flag about the vulnerabilities that continue to plague Indian capital markets despite a decade of reforms. The modus operandi was deceptively simple, but diabolically effective: aggressively buy select Bank Nifty stocks in the morning and dump them with equal force later in the day. This tactic drove down share prices and consequently triggered a fall in index values. While these stock trades often resulted in deliberate losses, Jane Street had already placed large short positions in index options, which gained substantial value as the market dipped. This two-pronged strategy enabled the firm to amass enormous profits while skirting direct violations of Foreign Portfolio Investor (FPI) norms—on paper, at least.
Sebi’s investigation highlights a carefully orchestrated scheme involving four entities under the Jane Street Group umbrella, two of which were registered FPIs. By setting up an Indian subsidiary—JSI Investments—in December 2020, and later JSI2 Investments in 2024, the firm gained a domestic foothold that allowed it to sidestep certain FPI restrictions, such as the prohibition on intraday trading in the cash segment. This corporate structuring essentially enabled them to exploit a regulatory grey area to undertake high-frequency, high-impact trades in the Indian market. Sebi’s charge that these trades amount to “egregious market manipulation” is not just a legal categorisation—it’s a statement on systemic fragility. What makes this scandal particularly disturbing is its scale and precision. Over the two-year period, the Jane Street Group made ₹44,358 crore in profits from index options trading. While they suffered losses in other segments—₹7,208 crore in stock futures and around ₹479 crore in cash and index futures combined—these losses were insignificant compared to the gains. Netting off, the firm booked a staggering ₹36,671 crore in profits. Worse, the bulk of these profits—₹32,681 crore—were reportedly repatriated by the two FPI-registered entities based in Singapore and Hong Kong. This raises uncomfortable questions about capital flight and the effectiveness of India’s regulatory frameworks when faced with sophisticated, global market players. If one firm could engineer such a systematic distortion of expiry-day price movements, what’s stopping others from doing the same? How resilient are our safeguards? Are current surveillance and audit systems equipped to detect manipulation in real time? The answers, unfortunately, appear sobering. Sebi’s action—temporarily banning Jane Street from participating in Indian securities markets and ordering the deposit of ₹4,843 crore in an escrow account—marks a crucial first step. But penalties, however severe, cannot undo the potential damage done to retail investors and market sentiment. Nor can they substitute for long-overdue structural reform. India needs sharper surveillance tools, tighter coordination between stock exchanges and the regulator, and a more proactive approach to monitoring FPI activity. Given the lightning-fast nature of algorithmic and high-frequency trades, post-facto investigations are simply not enough.
Moreover, this case should prompt a reevaluation of the FPI framework itself. While foreign investment is a vital source of capital and liquidity for Indian markets, the rules must evolve to address complex ownership structures and intra-group dealings that blur the lines between permissible strategy and unlawful manipulation. Loopholes that allow entities to technically comply while morally subverting the intent of the law must be closed, and soon. The globalisation of finance means that market manipulation is no longer a local issue—it’s transnational, tech-driven, and difficult to track. Jane Street is no small player. Founded in 2000, it is one of the world’s largest proprietary trading firms, operating in 45 countries with over 2,600 employees. Its entry into the Indian market in 2020 seemed like a win for India’s ambition to be a global financial hub. But this incident reveals the flip side: global giants come armed with cutting-edge tools and strategies that can easily outpace domestic oversight mechanisms. If there is a silver lining to this sordid saga, it is that it has come to light. Sebi’s investigation, though delayed, has provided a detailed picture of how the firm operated and what went wrong. Transparency is important, not just for enforcement, but for public trust. India stands at a critical juncture. With its fast-growing economy and deepening capital markets, it is increasingly on the radar of global financial institutions. But credibility and investor confidence are not built on economic growth alone—they rest equally on the rule of law and the strength of regulatory institutions. The Jane Street case is not just an isolated episode; it’s a stress test for the Indian financial ecosystem. It’s time we passed it.