Jane Street "Banked" on Retail Indian Investors: ₹36,502 Crore in ill-Gotten Gains before SEBI Awoke from its Somniferous Slumber
India’s biggest market manipulation case reveals how SEBI’s post-facto vigilance may be no match for lightning-speed algorithmic exploitation.
Retired IAS officer with over four decades in public service, including as Special Chief Secretary, Punjab. Holds an MA in Economics from the University of Manchester, UK. Writes on international markets, systemic financial frauds, cross-border taxation, and regulatory policy.
A Sophisticated Sinister Playbook Unveiled
The Securities and Exchange Board of India (SEBI) has pulled the curtain back on a complex and meticulously orchestrated market manipulation scheme masterminded by Jane Street Group, a US-based proprietary trading giant. The recently issued 105-page interim order, dated 3 July 2025, unveils what SEBI calls a "sinister scheme"—one that milked the Indian derivatives market for massive profits while retail investors haemorrhaged losses.
Operating through a blend of offshore and domestic entities, Jane Street exploited systemic gaps with frightening precision, unleashing strategies that simultaneously inflated and crashed market indices to secure windfall profits—all without leaving obvious fingerprints, until now.
The Two-Pronged Manipulation Strategy
Jane Street's tactics relied heavily on calculated manipulation of index-linked securities. Their favourite playground was the Bank Nifty index, where they employed two primary strategies to generate billions.
Morning Spike, Afternoon Crash
During morning trading hours, the firm aggressively purchased large volumes of Bank Nifty stocks and futures, artificially pushing the index upward. Parallel to this, they shorted the index through options—buying puts cheap and selling calls expensive.
Come afternoon, they reversed the trades—dumping stocks to crash the index, thereby monetising their earlier option positions. This pattern was consistently observed on 15 out of 18 trading days under SEBI’s lens.
Marking the Close
On three remaining days, Jane Street executed large sales near closing hours—just before daily settlement cut-offs—dragging the index down and reaping profits on their short-side options. The manipulation targeted over 40 constituent stocks of the Nifty and Bank Nifty indices, including heavyweight names such as HDFC Bank, ICICI Bank, and SBI.
Billions Minted in Microseconds
Jane Street’s Indian operations weren’t just lucrative—they were astronomical in scale.
Total profits amassed: ₹36,502 crore
Options segment alone: ₹43,289 crore
Engineered losses in cash and futures: ₹7,208 crore
Single-day record gain: ₹735 crore on 17 January 2024
In response, SEBI ordered the impounding of ₹4,843.57 crore—one of the largest clawback orders in Indian capital market history. But critics argue this is a pittance compared to the haul.
A Sophisticated Tax Evasion Web
Jane Street’s profit routing was equally cunning. By using two Indian companies (JSI and JSI2) in tandem with Singapore and Hong Kong-based Foreign Portfolio Investors, they cleverly booked most profits offshore. This benefited from the India-Singapore Double Taxation Avoidance Agreement (DTAA), which exempts many derivatives trades from taxation.
Tax authorities are now probing these structures under General Anti-Avoidance Rules (GAAR). Should GAAR be invoked:
Offshore gains could be reattributed to Indian entities
Up to 38.22% tax could be levied
Transactions may be deemed "impermissible avoidance arrangements"
The scheme not only undermined the equity market’s integrity but also poked holes in India’s tax base.
Enforcement and the Illusion of Justice
While SEBI has frozen ₹4,843.57 crore and banned Jane Street entities from the market, there’s scepticism about actual recovery. The order allows the firm to resume operations if it deposits the impounded amount—raising fears that this might merely be treated as a cost of doing business.
All accounts—bank, demat, and custodial—have been frozen. However, legal experts warn the real challenge will be tracking and recovering dispersed funds in time.
Retail Investors: The Real Losers
While Jane Street’s servers hummed with profits, Indian retail investors paid the price—dearly.
Over ₹1.05 lakh crore lost by retail traders in FY25
91% of retail traders suffered consistent losses
Average loss per trader: ₹1.10 lakh in FY25
Surge in retail participants: 96 lakh in FY25 (up from 86.3 lakh in FY24)
SEBI acknowledged that these traders were "enticed" into participating at artificially inflated or depressed price levels, unknowingly becoming fodder for Jane Street’s gain engine.
SEBI’s Timeline: Too Late, Too Little?
Jane Street’s manipulation ran unchecked for over two years—from January 2023 to March 2025. Despite the gravity and scale, SEBI’s concrete action only came in July 2025. A preliminary probe reportedly began in April 2024, followed by a caution letter in February 2025. But the firm was still active months later.
Former SEBI Chairperson Madhabi Puri Buch insists the regulator acted in time. But the delay—more than a year from suspicion to action—raises uncomfortable questions about the speed and effectiveness of regulatory mechanisms in an age of algorithmic warfare.
Fallout and Fright in Financial Circles
The ban has triggered immediate shockwaves:
Derivatives trading volumes dropped
Shares of related companies fell between 3.5% and 9%
Market participants now fear wider scrutiny of high-frequency trading (HFT) firms
More fundamentally, the case has reignited debate on whether Indian retail traders can ever stand a chance in a derivatives market dominated by AI, bots, and lightning-fast execution speeds.
Beyond the Trojan Mare: Where Do We Go From Here?
Jane Street’s tale may not be the last of its kind. With cross-border trades, opaque ownership structures, and algorithmic camouflage, traditional surveillance methods are simply no match.
What India needs now is an AI-driven surveillance system, both within the exchanges and SEBI, capable of real-time flagging of suspicious activity. Machine-driven manipulation must be met with machine-level scrutiny.
It is fashionable in India to conduct the perfect post-mortem after the patient has died—often with much pomp and performative expertise. Simpler, more effective, and economical preventive systems, however, remain neglected or delayed.
Will this scandal prompt genuine reform? Or will the dust soon settle?
This is, after all, only an interim order—and before long, a new Trojan Horse, or shall we say mare, may canter quietly into India’s markets, again conning “smart” Indian retail traders in the F&O section—who, with misplaced confidence, believe their grey cells can outwit overseas machines that capture data and execute trades within microseconds.