On July 3, 2025, India’s market watchdog, the Securities and Exchange Board of India (SEBI), issued an unprecedented interim order against U.S.-based proprietary trading firm Jane Street. The decision, which effectively bans the Wall Street powerhouse from participating in Indian securities markets, has sent ripples across global trading circles and cast a spotlight on regulatory oversight in one of the world’s busiest derivatives ecosystems.

The Allegations At the heart of SEBI’s action is a trading strategy allegedly employed by Jane Street over two years. According to the 111-page interim order, the firm exploited expiry-day volatility—aggressively buying index futures and stocks during morning sessions and selling them later to benefit from short options positions. One transaction on January 17, 2024, allegedly earned the firm over ₹735 crore ($86 million) in a single trading day.

SEBI claims this was not a one-off but part of a recurring pattern that manipulated market behavior and masked intent through deliberate losses in some segments. The regulator has frozen nearly ₹4,843 crore ($570 million) in what it calls “unlawful gains,” while hinting that more names could surface as the investigation expands.

According to the 111-page interim order, the firm exploited expiry-day volatility—aggressively buying index futures and stocks during morning sessions and selling them later to benefit from short options positions.

Market Response and Industry Reactions The fallout was immediate. Shares of domestic brokerages like Angel One, Nuvama, and even the Bombay Stock Exchange fell sharply amid fears of reduced liquidity. Industry leaders, including Zerodha co-founder Nithin Kamath, warned that proprietary trading firms account for almost half of India’s index options volume—a sudden exit could disrupt retail trading and market efficiency.

Jane Street, known for its quantitative expertise and secrecy, has strongly denied wrongdoing and is expected to appeal the decision. In a brief statement, the firm emphasized its commitment to legal compliance and fair market practices.

Wider Implications for India’s Financial Landscape India is currently the largest equity derivatives market by volume, and SEBI’s aggressive stance could reshape its future. With tighter scrutiny on algorithmic and high-frequency strategies, other global firms operating in the country may reassess their risk exposure. More importantly, this episode underscores the growing maturity—and assertiveness—of Indian regulators.

As SEBI prepares to examine other indices and trading dates for similar patterns, questions loom about where the line between aggressive arbitrage and manipulation is drawn. For now, one thing is clear: India’s financial regulators are no longer content with playing catch-up—they’re writing new rules in real time.

Have your say: Do you believe tighter regulations will help level the playing field in India’s markets, or could they deter global investment? Join the conversation below.