Global trading giant Jane Street is fiercely pushing back against India’s market regulator, Sebi, following a significant ban and order to seize nearly Rs 5,000 crore.
India’s Market Regulator Takes Action
The Securities and Exchange Board of India (Sebi) recently dropped a bombshell on Jane Street, a New York-based proprietary trading firm. Sebi banned the firm from market participation and ordered it to impound Rs 4,843 crore, classifying these as “unlawful gains.”
The Indian regulator accused Jane Street of being part of an “intentional, well planned, and sinister scheme” to manipulate Indian markets. The focus of these allegations is the firm’s derivatives trades, particularly those involving Nifty Index futures.
Jane Street’s Strong Denial
Jane Street has unequivocally rejected Sebi’s charges. In an internal memo to its 3,000 employees, the firm labeled the accusations “extremely inflammatory” and expressed that it was “beyond disappointed” by the order.
“It’s deeply upsetting to see the firm mischaracterised this way,” the memo stated. Jane Street asserted that its reputation was being “tarnished by a report based on so many erroneous or unsupported assertions.” The firm is preparing a formal response and intends to contest the order through legal channels.
Contesting the “Marking the Close” Allegation
Sebi’s findings suggest Jane Street engaged in “marking the close,” a strategy to artificially influence closing prices. The regulator claimed Jane Street’s Nifty index futures trades showed a pattern of consistently placing orders at or above the last traded price, especially towards the end of trading sessions.
However, Jane Street staunchly refutes this. The firm stated that its trading activity was routine “basic arbitrage trading,” a legitimate and widely accepted industry strategy. They argue Sebi’s metric for market impact “seems disconnected from actual market dynamics.”
The firm also denied disregarding concerns from the National Stock Exchange (NSE). Jane Street claims it promptly halted trading to understand the exchange’s issues and adjusted its strategies accordingly. They added that subsequent efforts to communicate with Sebi have been “consistently rebuffed.”
Who is Jane Street?
Jane Street is one of Wall Street’s most prominent and successful proprietary trading firms. Over the past two decades, it has grown into a major force across global financial markets, known for its high trading volumes and significant revenues.
Last year, the US firm nearly doubled its net trading revenues to an astounding $20.5 billion. Its success even outpaced several of Wall Street’s biggest banks, highlighting its dominant position in the financial world.
Interestingly, Sebi’s investigation was reportedly triggered by a lawsuit Jane Street filed last year against Millennium Management and two former traders. That lawsuit alleged the theft of a valuable trading strategy, which was later linked to Indian options trading.
- Jane Street denies all allegations of market manipulation by India’s market regulator, Sebi.
- Sebi has banned the firm from trading in India and ordered the impounding of Rs 4,843 crore.
- The firm plans to legally contest the order, calling the accusations “extremely inflammatory.”
- Sebi’s probe was reportedly linked to a lawsuit filed by Jane Street against former traders.
As this high-stakes dispute unfolds, the global financial community will be closely watching the legal battle between one of the world’s largest trading firms and India’s market watchdog.
