How Jane Street allegedly manipulated index closing on expiry days
Market regulator Securities and Exchange Board of India (Sebi) has barred US trading entity Jane Street and three of its related entities JSI2 Investments Private Ltd, Jane Street Singapore Pte. Ltd, Jane Street Asia Trading Ltd from accessing the market. Sebi has also directed these entities to deposit in an account in favour of SEBI of illegal gains of Rs 4,843.5 crore. The regulator has also directed a debit freeze on the bank accounts of these entities.
What was Jane Street’s strategy?
According to a Sebi interim order dated July 3, on 14 expiry days, Jane Street used to heavily buy Bank Nifty futures in huge amounts as well in the cash segment and sell Bank Nifty options in big numbers -- all in the morning. After noon, the Jane Street entities used to aggressively sell large amounts in Bank Nifty futures and influence the closing of the index on expiry days.
Instances of alleged manipulation
For example, in the morning of January 17, 2024, Jane Street aggressively bought Bank Nifty futures worth Rs 4,370 crore and sold Bank Nifty options for Rs 32,115 crore.
After noon, it aggressively sold large amounts in Bank Nifty in the underlying futures for Rs 5,372 crore.
This created a peak short position of Rs 46,620 crore in the Bank Nifty index options segment . This led to a softer closing of Bank Nifty and Jane Street made a profit of Rs 735 crore in the options segment, and made an intraday loss of Rs 61.6 crore in cash and futures. Thus, it made a clear-cut gain of Rs 673.4 crore on that expiry day.
Sebi has found another strategy of Jane Street, under which huge short positions were created in Bank Nifty futures and its constituents in the cash segment in the last two hours to manipulate the index expiry closing.
On July 10, 2024, Jane Street aggressively sold Bank Nifty futures for Rs 2,800 crore and created a short position in Bank Nifty options for Rs 44,154 crore. Hence, the closing was softened and a profit of Rs 225 crore was made.
Repeated patterns
SEBI found a repeated pattern in the trades and alleged that these were not normal trades but were manipulation and against the SEBIs prohibition of fraudulent and unfair trade practice (PFUTP) regulation.
Despite the news of Sebi's likely investigation against Jane Street, the entities continued to play the market. According to the Sebi order, on May 15, 2025, and two other days in May 2025, in the last two hours of Nifty expiry, Jane Street aggressively bought Nifty futures and underlying stocks for Rs 4,911 crore to influence the closing.Moneycontrol was the first to report that hedge fund managers have complained against such practices to Sebi and are seeking investigation.