Blatant market manipulation…: Zerodha CEO Nithin Kamath explains how SEBI ban on Jane Street may impact F&O market
Nithin Kamath, CEO and co-founder of Zerodha, praised the Securities and Exchange Board of India (SEBI) for taking action against US trading firm Jane Street over alleged stock market manipulation, through which the firm reportedly made over ₹36,500 crore in gains.
The 45-year-old entrepreneur described Jane Street’s alleged actions as “blatant market manipulation” and expressed surprise that such practices continued despite multiple warnings from the exchanges.
In a 105-page order on Thursday evening, SEBI detailed how Jane Street manipulated Indian stock market indices through its trades in the derivatives segment. In one of the most stringent actions ever against a foreign trading firm, SEBI has barred Jane Street from accessing the market and also impounded ₹4,843 crore from the firm, calling it illegal profits made through the alleged manipulation.
“You’ve got to hand it to SEBI for going after Jane Street. If the allegations are true, it’s blatant market manipulation. The shocking part? They kept at it even after receiving warnings from the exchanges,” said Nithin Kamath in a social media post on X on Friday, July 4.
India vs US market regulator
Hazarding a guess, Kamath said that Jane Street likely kept at its manipulative activities amid lack of a strict US regulatory regime, adding that none of these practices are allowed in the Indian stock market thanks to the country’s regulators.
“Maybe this is what happens when you’re used to the lenient U.S. regulatory regime. Think about the structure of U.S. markets: dark pools, payment for order flow, and other loopholes that allow hedge funds to make billions off retail investors. None of these practices would be allowed in India, thanks to our regulators,” Kamath said.
Sebi bans Jane Street: Impact on F&O market volumes
Zerodha CEO, however, also highlighted a flip side to the SEBI ban, suggesting that this move spells trouble for both exchanges and brokers as pop trading firms like Jane Street account for a major chunk of options volumes in India’s derivatives market.
Prop trading firms are companies that trade for their own profit using advanced strategies. These firms are key players in global markets but are also closely watched by regulators due to their influence on market prices and liquidity.
Kamath explained that prop trading firms like Jane Street account for nearly 50% of options trading volumes. If they pull back— which seems likely —retail activity (~35%) could take a hit too, Kamath said, adding that this could be bad news for both exchanges and brokers.
“The next few days will be telling. F&O volumes might reveal just how reliant we are on these prop giants. I’ll share more data as and when anything interesting turns up,” he concluded.
India is the world’s largest derivatives market, accounting for nearly 60% of global equity derivative trading volumes of 7.3 billion trades in April, a Reuters report said, quoting the Futures Industry Association.
Disclaimer: This story is for educational purposes only. The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before making any investment decisions.
