Post ₹36,500 Cr Scam, SEBI Faces Pressure to Reform Derivatives Market

After ₹36,500 Cr Jane Street Scam, Can SEBI Restore Trust in India’s Derivatives Market?

The ₹36,500 crore market manipulation case involving global algorithmic trading firm Jane Street has triggered widespread concerns about the integrity of India’s derivatives market. The fallout has highlighted critical regulatory loopholes and sparked fresh debate on the Securities and Exchange Board of India’s (SEBI) ability to safeguard market fairness — especially ahead of growing retail participation.

In its 115-page interim order, SEBI accused the US-based firm of engaging in misleading, manipulative trading practices that generated massive profits while distorting index movements and misleading retail investors.

SEBI’s Crackdown: A Landmark Ban
Acting on its findings, SEBI has barred Jane Street from Indian markets and ordered it to return ₹4,840 crore in alleged illegal gains. The action is among the regulator’s most significant against an overseas firm.

According to SEBI, Jane Street deployed a combination of two key strategies — ‘Intraday Index Manipulation’ and ‘Extended Marking the Close’ — which allowed it to unfairly influence prices and extract outsized profits, especially from Bank Nifty options.

The company’s Indian footprint spanned four entities:

JSI Investments Pvt Ltd

JSI2 Investments Pvt Ltd

Jane Street Singapore Pte Ltd

Jane Street Asia Trading Ltd

Between January 2023 and March 2025, the group made ₹43,289 crore in gross trading gains, with a net profit of ₹36,502 crore after adjusting for losses in other segments.

How the Alleged Manipulation Worked
SEBI flagged the following red flags in the company’s trading patterns:

₹17,319 crore was earned from Bank Nifty options alone.

Trades were heavily concentrated near expiry timings, when small moves can trigger large price swings.

Activity spiked in short time windows, maximizing market impact.

The firm ignored caution letters from the NSE in February 2025, urging restraint.

These practices, SEBI said, violated its Prohibition of Fraudulent and Unfair Trade Practices (PFUTP) regulations and misled retail traders who rely on index-based price discovery.

A Crisis of Confidence
Experts warn that the impact extends far beyond financial losses.

“It’s not just about money — it’s about trust,” said Gaurav Goel, Founder of Fynocrat Technologies. “Retail investors are the most vulnerable when markets are manipulated using complex strategies they can’t see or understand.”

Goel urged SEBI to implement real-time monitoring across both equity and derivatives segments, as manipulators often operate across multiple instruments to conceal intent.

Market Impact and Global Ripples
Jane Street has long been one of the largest players in India’s derivatives market.

“When a big firm is banned, others tread carefully. That could mean lower volumes ahead,” said Siddhart Bhamre, head of institutional research at Asit C Mehta.

However, Angel One chairman Dinesh Thakkar remains optimistic, noting that India’s growth is structural, not firm-dependent.

“Strong domestic capital flows, macro stability, and investor confidence continue to support our markets.”

Tax Scrutiny and GAAR Questions
The investigation may soon widen. Tax authorities are now expected to examine how Jane Street allegedly used its Singapore-based FPI to route trades and profits, raising questions of treaty misuse.

“If SEBI’s findings hold, GAAR could be invoked to reattribute profits to Indian entities liable for tax,” said Harshal Bhuta, partner at PR Bhuta & Co.

The Big Question: Can SEBI Plug the Gaps?
The Jane Street case has exposed how sophisticated trading firms can exploit gaps in India’s regulatory system — particularly around high-frequency and derivatives trading.

As retail participation surges and market volumes grow, experts say SEBI must act fast to:

Build integrated cross-market surveillance

Enforce tighter FPI rules

Increase transparency around proprietary trading

The scandal may fade, but its lessons will remain. Market confidence depends not just on punishment after the fact — but on preventing the next Jane Street before it happens.