Does Jane Street Scandal Indicate Structural Vulnerabilities In Stock Market?
New Delhi: India’s booming derivatives market, now the largest in the world by volume, is facing a major reckoning. The Securities and Exchange Board of India (SEBI) has initiated action against US-based trading giant Jane Street, exposing what appears to be Rs 25,000 crore worth of market manipulation, largely in Bank Nifty index options.
What started as a regulatory notice has snowballed into a deeper expose of the structural vulnerabilities in the Indian stock market, especially in the F&O (futures and options) space where 91 per cent of retail investors are losing money, according to SEBI’s latest findings.
Jane Street’s Derivatives Game: Rs 735 crore profit in one day
According to SEBI’s investigation, Jane Street manipulated the Bank Nifty on 17 January 2024, profiting Rs 734.93 crore in a single day. The firm allegedly first created the illusion of a market rally by purchasing Rs 4,370 crore worth of stocks and futures, prompting retail investors to jump in.
But behind the scenes, Jane Street had already taken massive bearish options positions worth Rs 32,115 crore — buying puts and selling calls. Once retail participation surged, the firm abruptly dumped its earlier positions, crashing the index and profiting massively from the fall.
This is a textbook case of market manipulation: create false momentum, mislead participants, and profit from engineered volatility.
Jane Street’s Rs 25,000 crore gain in 2024 raises red flags
Market experts estimate that Jane Street made Rs 25,000 crore in profits from Indian markets in 2024, with Rs 17,319 crore coming from Bank Nifty options alone. That figure represents around 40 per cent of all profits made from index options, according to market data.
SEBI’s initial order identified Rs 4,843 crore of these gains as illegal, pending further scrutiny. Only 21 out of 500 trading sessions have been reviewed so far, indicating the full extent of the manipulation could be far greater.
SEBI’s timeline of action against Jane Street
SEBI’s investigation wasn’t overnight. Here’s how the timeline unfolded:
April 2024 – SEBI begins internal probe following media reports
July 23, 2024 – SEBI directs NSE to investigate Jane Street trades
August 2024 – Jane Street responds to SEBI notices
October 1, 2024 – SEBI issues circular tightening expiry-day trade norms
November 13, 2024 – NSE submits report confirming irregularities
February 4, 2025 – SEBI finds prima facie evidence of PFUTP violations
February 15, 2025 – Jane Street continues large trades despite warnings
91% of retail traders lost money, says SEBI
The bigger concern is what this says about the market ecosystem. According to SEBI’s FY25 study:
91 per cent of retail F&O traders incurred losses
Total retail losses in FY25 surged to Rs 1,05,603 crore, up 41 per cent from FY24
Number of active retail F&O traders dropped from 61.4 lakh in FY24 to 42.7 lakh in FY25
While sophisticated algorithmic players like Jane Street gained massively, retail investors — who form the backbone of Indian trading volumes — suffered disproportionately.
Not just one firm, but a systemic manipulation?
Market experts believe this is just the tip of the iceberg. Speaking to Zee Business, Mayank Bansal, President of a UAE-based hedge fund, stated: “This isn’t just about one company. It’s about a system where a few firms walk away with thousands of crores, while retail investors are left with nothing.”
Jane Street’s tactics are now under regulatory glare, but questions remain over how many other global or domestic trading firms may be employing similar expiry-day manipulation strategies.
