Jane Blitzes D-Street

“Investing is a dreary pastime,

like watching paint dry or grass

grow. If you want excitement,

take $800 and go to Las Vegas.”

— Paul Samuelson

Here’s one for the history books in India’s financial capital Mumbai, a saga that wouldn’t be out of place in the cheesiest of boardrooms or the sleaziest of shanties across the country. New York-based trading firm Jane Street Capital allegedly made Rs 36,502 crore in the Indian stock market in just two years, of which a whopping Rs 4,800 crore was ‘printed at will’ through market manipulation. The firm with a docile-sounding moniker brutishly bared its fangs and turned the market into its personalized ATM, using a strategy that was clever, devious and very, very profitable.

Jane Street’s conducts its high-frequency trading operations in India through four entities, two of which are domestic. The fantastic thing about this reported financial manoeuvring is that for this ‘fraud’, the firm relied on ‘incompetence’, which saw it begin its investments with truckloads of losses. Experts are gleeful, saying the loss wasn’t due to incompetence—it was classic, genius-level money-creation at work. Jane Street, meanwhile, has repeatedly denied any wrongdoing.

If we speak of the specifics of the incident, the trade began by buying into the Bank Nifty between 9.15 am and 11.47 am on January 17, 2024—stocks worth Rs 4,370 crore were picked up. The buying spree pushed indices up, after which Jane Street sold expensive ‘calls’ and bought cheap ‘puts’, claim the authorities. In the process, it built up Rs 32,115 crore in bearish position (7.3 times its stock position). Come afternoon, between 11.49 am and 3.30 pm, the trading firm dumped all its stocks for Rs 5,372 crore. This pushed the index down and made ‘puts’ profitable, while the ‘calls’ were all but worthless.

Worthless? Not Really

The overall result is mouth-watering—Jane Street lost Rs 61 crore in stocks, but allegedly made Rs 734 crores in options. Its net profit in one day, as per the authorities, was Rs 673 crore. And the trade didn’t stop there. Phase II of the strategy, ‘Mark the Close’, began—but that’s another story, to be discussed another day, of how this made profits of nearly Rs 4,000 crore. The game appears to have been rigged from the start, and the authorities got wind of it quite late in the day.

The Securities & Exchange Board of India (SEBI) has since meted out punishment. Jane Street has been banned from Indian markets. Rs 4,843 crore of its assets have been frozen, along with bank accounts. It has been asked to exit India within three months. The market watchdog and other overseers with fangs have now morphed into Pinscher mode—they are continuously monitoring all its activities.

That throws up questions. Did one trading firm actually make a profit of Rs 4,843 crore in just 21 days? Are there others indulging in similar activities, and since when? How much have retail traders and smaller investors lost? The answers would be as heartbreaking as they would be interesting, especially given that this single trade event may be the tip of a far bigger, hidden iceberg. Remember Titanic?

When SEBI Got Tough

Though Jane Street adamantly denies it all—insisting that its tactics constituted legal arbitrage—the interim SEBI order paints the picture of a calculated, high-frequency ‘pump-and-dump’ strategy. With derivatives volumes teeming with small traders, this manoeuvre not only shook investor confidence but also reopened unsettling questions about fairness in modern markets, SEBI says. It is a story with resounding reverberations—from Barings to Harshad Mehta and Jesse Livermore to Ketan Parekh—highlighting how ingenuity and opacity often prey on the least equipped, the retail investor.

Market voices are getting hoarse. SEBI’s whip and the financial fallout have drawn attention beyond compliance desks, triggering alarmed analysis and commentary. “Jane Street has not been a good‑faith actor that can be trusted. The integrity of the market and the faith of millions of small investors and traders can no longer be held hostage to the machinations of any untrustworthy actor,” SEBI said.

Others like Wright Research and Greenland Investment echoed the sentiment, labelling the trading as a ‘watershed moment’. It signals an aggressive stance against global players potentially gaming the Indian system. The SEBI order puts all high-frequency traders on watch—they are welcome in the market, but they must play by the rules. Some, praising SEBI’s moves, said there was a need to crack the whip harder. “SEBI should impound it all and, on top of it, impose a huge fine and initiate criminal proceedings. Anyone who abuses the market should be disciplined. Surveillance is in place and market manipulation will not be tolerated—that should be the message,” Indian traders said.

Deeper Global Echo

This is not the first time a single trader or group has created market mayhem. In 1995, Nick Leeson, a derivatives trader in Singapore, took massive unauthorized positions in Nikkei futures and concealed them with the now infamous “88888 error” account. In just a year, his losses exceeded £800 million, causing the collapse of Barings, the oldest merchant bank in Britain. Leeson is now a case-study for how a single individual can decapitate an institution and erode public confidence. The Jane Street episode triggers similar alarms, albeit on the flip-side; of how a mega-firm could spice all this up at global scale and with absolute obscurity, quite unworried about secrecy or hubris.

The spectre of manipulation is familiar to India, with two names looming large; Harshad Mehta and Ketan Parekh. Mehta used a bank receipt loophole—essentially unsecured bank instruments—to buy massive volumes of select stocks, inflating prices up to 40× in just months. Parekh engineered a web of circular trades around a set of stocks dubbed ‘K-10’, borrowing heavily from banks. Mehta’s pump-and-dump scheme imploded in April 1992, while Parekh’s scheme met its maker in 2001. Both triggered a crash and lawsuits. Both saw retail traders and smaller investors lose lifetime savings.

It was Mehta and Parekh who gave birth to the term ‘scam’ in India. Their dealings bear an uncanny and haunting resemblance to the recent alleged manipulation by Jane Street. All three had massive scale, timing and structural arbitrage to mislead an unsuspecting market. The difference is that today, the playing field is far more automated, atomic to the millisecond. But the scam was still managed.

Toll on the Unsuspecting

As always, the unwavering pattern witnessed over decades has been revisited—small traders and investors always lose. In Mehta’s aftermath, retail investors were crushed when the market crashed by Rs 3,500 crore (value 33 years back). Parekh’s fall left mutual fund and small-scrip investors reeling, though brokers and banks reassumed control quickly. In the current Jane Street case, SEBI’s own figures are grim—in the year leading up to March 2025, retail derivative investors lost Rs 1.06 lakh crore, while proprietary and foreign enterprise traders pocketed billions. Nine out of ten options buyers lost money.

This happened in India, whose options market is now the world’s largest by volume, trading Rs 25 lakh crore (notional) daily, with high-frequency and proprietary firms accounting for 60 per cent of options and 40 per cent of equity trades. Co-location loopholes, circular trading and expiry manipulation are not anomalies; they are there-to-exploit systemic vulnerabilities.

From Leeson’s Barings blow-up to Mehta’s bank receipts misuse, Parekh’s circular trading and Jane Street’s expiry-day dive, stock markets have often tolerated disruption as long as it remains contained. But this is different. When a sophisticated, mostly anonymous firm can orchestrate multi-thousand-crore gobbling of small-time traders—reversing markets in milliseconds and trading to the tune of trillions—the culprits are not human error or reckless ambition. It is a systemic risk, a digital juggernaut that can instantly destroy wealth and trust across millions.

If SEBI’s action against Jane Street becomes the norm, markets might emerge fairer, but that path will be painful. After all, regulators must not just react, they must foresee, monitor and reform. It is that simple. If the next ‘scam’ involves a few rogue traders, 100 proprietary desks and no explosions, we may only realize it when it is too late—by which time the retail dead will far outnumber the headlines.

The writer is a retired IPS officer, Adviser NatStrat, and a former National Security Advisor in Mauritius. He can be reached on narayanrajeev2006@gmail.com. Views expressed are personal