SEBI has announced to increase the scope of investigation against Jane Street. Jane Street is a global trading firm, which is identified worldwide. SEBI has made this announcement despite giving a clin chit to Jane Street of National Stock Exchange (NSE). The trading firm is accused of using manpulative trading strategy, which made him a huge profit. Indian traders had to bear its loss. The entire matter came to light in January 2025 when NSEs were seen to see some extraordinary trading patterns, which were associated with some high-frequency trading (HFT) firms including Jane Street.
Although these trades were within a few seconds, their effect was quite widespread. This created a chain reaction, which turned the market move in the direction that was beneficial for these firms. Due to these trades, stoploss of other traders was triggered, which had a great impact. This also increased the market ups and downs. It is clear that due to these trades, a situation of taking unfair advantage in the market was created.
How big Jane Street’s operation in India was known when his fight in court with rival company Millennium Management came to light. The case hearing in the court revealed that Jane Street had earned a profit of $ 1 billion from equity derivative trading in India. After this, when the scope of the investigation increases, it was found out that some firms were detected to work together, which could probably be a cartal of these firms.
The alleged activities of this cartal came to an eye in April 2024, when there was a special index expiry. Traders found the pattern of coordinated positioning in the indices, after which some large underling stocks showed sharp ups and downs, which had a large stake in the index. For the purpose of manipulating the market, an attempt was made to create such movement.
On April 18, 2024, veteran trader Santosh Passi questioned the extraordinary ups and downs in prices. These movements not only led to a violation of the Limited Price Protection (LPP) range but also caused great losses to some of India’s biggest algorithm trading firms. The question is that such an extraordinary movement took place in strict regulated framework, which indicates manipulating some firms. It is also believed that it cannot be the work of any one firm.
LPP means a range or limit of prices that aim to prevent a lot of ups and downs in prices. The breakdown of this range or limit and frequent breakdown means that there are some shortcomings in the system, which are taking advantage of some powerful firms. SEBII to investigate this matter in depth means that the truth will be revealed and after that the responsibility will be fixed. If SEBI is successful in exposing the alleged cartel of trading firms, it will increase trust in Indian markets. However, the matter also raises some other serious questions.
If this type of manipulation can be done in the world’s most liquid derivative market, it means that then the segments considered to be less liquid of smallcap and midcap stocks will be easier to do so. SEBI should not only investigate the matter in depth but also create a strong system to prevent such manipulation.
Shishir Asthana
