SEBI’s explosive 105-page interim order last week pulled the curtain back on one of the most controversial trades in India’s recent market history—allegedly orchestrated by Jane Street, a global high-frequency trading (HFT) powerhouse. The regulator accused the firm of deploying manipulative expiry-day trades in the Bank Nifty options segment, cornering gains worth Rs 4,840 crore between January 2023 and March 2025.
Jane Street, barred from Indian markets and facing an asset freeze, is now preparing for a full-blown legal battle. So what’s driving the American trading behemoth to take on SEBI? Let’s decode.
What SEBI alleges: Expiry-day F&O trades masked as ‘intra-day index manipulation’
At the heart of SEBI’s case is a well executed strategy primarily on options expiry days. Jane Street allegedly bought massive volumes of banking stocks and their futures early in the day to push up the Bank Nifty index, which in turn lured retail traders into buying call options. Once those positions piled up, the firm abruptly offloaded those stocks, triggering a market slide and cashing in on put options it had quietly accumulated.
Two common themes were flagged:
Intra-day Index Manipulation: when manipulating prices upwards on early trades only to reverse positions to take part on the inevitable price fall.
Extended Marking the Close: a method of employing selling pressure in the late-day market timed to distort the closing price and allow the manipulator to extract profits from predetermined options bets.
Jane Street allegedly repeated this playbook across multiple expiry days, exploiting the deep liquidity of Bank Nifty options, a retail favourite with over 16 lakh participants compared to just thousands in the cash market.
Why Jane Street isn’t backing down:
Global reputation, Rs 4,840 crore at stake
The U.S.-based firm, which manages billions in daily trades across geographies, is not taking SEBI’s order lying down. In an internal memo to its 3,000 employees, leaked to the Financial Times , Jane Street called SEBI’s language “inflammatory” and findings “erroneous.” It insists the trades in question were legal and data-driven, not manipulative.
Key reasons Jane Street is fighting back:
Protecting its algorithmic trading IP: The SEBI probe was triggered by a U.S. lawsuit Jane Street filed against rival Millennium Management, alleging theft of an algorithm that delivered over $1 billion in global profits. SEBI’s investigation into Indian expiry-day trades stemmed from this court case. Jane Street now wants to protect its proprietary models and avoid public scrutiny.
Reputational: SEBI’s debarment order directly accuses the firm of undermining market integrity, an existential risk for an HFT firm. The regulatory devaluation in India could signal regulatory review in other jurisdictions faced with reputational risk.
No prior notice, Jane Street claims: While the NSE debarred the firm for suspected manipulation in February 2025, Jane Street claims SEBI “systematically disregarded” the firm’s efforts to clarify factual or respond to concerns in all events subsequent to February and claims the interim debarment order blindsided it.
Precedent: They may lose and give advocates of order in markets what they seek -encouraging other firms, particularly foreign ones, to withdraw from Indian derivatives markets, especially since India’s F&O segment is now is the world’s largest derivatives market. Jane Street has too much at stake to just exit the market.
SEBI’s swift reaction
SEBI’s swift action is being seen as part of a broader clean-up of India’s derivatives segment, which has seen massive growth but also growing concerns over speculative activity and retail losses. The regulator is also reportedly investigating whether other indices and trading firms are employing similar tactics.
But critics argue the crackdown, while necessary, may also trigger an F&O liquidity squeeze if more global players exit. Jane Street’s potential departure could send shockwaves across expiry-day volumes in Bank Nifty—currently the most traded index on the NSE.
What next?
Jane Street is expected to challenge the interim order at the Securities Appellate Tribunal (SAT) in the coming weeks. SEBI, meanwhile, is pushing for a broader enforcement framework to track high-frequency expiry-day trades more aggressively.
This case could become a turning point in how India regulates global algorithmic trading participation. If Jane Street wins, it could set limits on SEBI’s ability to restrict HFT strategies. If it loses, a new playbook for expiry-day surveillance and stricter F&O norms could emerge.
The bigger takeaway for investors
Retail traders betting on options expiry days now face a sobering reminder—large firms with algorithmic muscle can move the market in ways that outpace human reflexes. The Jane Street saga is not just about alleged market abuse. It’s about the collision between institutional speed and retail sentiment.
Until the final verdict is out, SEBI vs Jane Street is one of the most important showdowns in Indian capital markets—and everyone from exchanges to brokerages to regulators across the globe is watching closely.