Jane Street probe:
Sebi chief Tuhin Kanta Pandey rules out weekly expiry ban, signals tighter derivatives watch

Jul 7, 2025

Synopsis
Sebi is tightening surveillance on the derivatives market following allegations against Jane Street for manipulating index levels, but it is not currently planning to curb weekly index expiries. The regulator is focused on protecting retail investors and upgrading its surveillance tools to prevent market distortion.

Securities and Exchange Board of India (Sebi) will continue tightening surveillance of the derivatives market but is not considering curbing weekly index expiries at this stage, Chairman Tuhin Kanta Pandey said on Monday, after the regulator last week barred U.S.-based quant firm Jane Street from local markets for alleged manipulation of index levels.

Pandey said, "Sebi is focused on retail investor protection" and surveillance is tightened on both Sebi & exchange level, adding that the regulator was "working toward upgrading its surveillance tools," according to agencies.

The Sebi chief's remarks come in the wake of a sweeping interim order by Sebi issued on Friday, which accused Jane Street and its affiliates of deploying “intra-day index manipulation” strategies to distort Nifty and Bank Nifty levels, misleading retail traders and booking gains worth Rs 4,840 crore.

While that action has triggered speculation about possible curbs on expiry-day trading in India’s hyperactive index options market, Pandey clarified there was no move to scrap weekly expiries as of now. “Sebi has no intention to curb weekly index expiry as of now,” he said.

However, Sebi may still revisit the structure of expiries. "Action already taken on weekly expiry... and further decisions (will follow) after analysing fresh data,” Pandey said. He added that the regulator “may analyse weekly vs monthly expiry losses in detail.”

Sebi barred the U.S.-based quant trading firm Jane Street and four affiliates from accessing Indian markets on July 3 and ordered the impounding of Rs 4,840 crore in alleged unlawful gains.

‘Surveillance problem’

The Sebi chief also characterised the Jane Street episode as primarily a surveillance issue. “Jane Street issue was a surveillance problem,” he said, hinting that better early-warning systems could have prevented the extent of market distortion observed on expiry days.

Sebi has faced mounting pressure to overhaul its oversight of India’s derivatives market, where it says 93% of retail traders incur losses. The case against Jane Street, one of the most active global trading firms in India, has become a flashpoint in that debate.

In the July 3 order, Sebi accused the firm of engineering price moves in over 40 Nifty 50 and Bank Nifty constituent stocks on expiry days, pushing up the index in the morning through aggressive cash and futures buying, then reversing those trades while holding large bearish options positions. This dual strategy allegedly earned the firm Rs 735 crore on a single day — January 17, 2024.

Sebi’s order names four Jane Street entities — JSI Investments Pvt Ltd, JSI2 Investments Pvt Ltd, Jane Street Singapore Pte Ltd, and Jane Street Asia Trading Ltd — which are now banned from buying, selling, or dealing in securities, directly or indirectly. Banks have been directed to freeze all debit transactions from the group’s accounts.

The regulator said Jane Street earned Rs 36,502 crore in total profits between January 2023 and March 2025, of which Rs 43,289 crore came from index options. These were partly offset by Rs 7,687 crore in losses across cash and futures trades.

Limited broader fallout expected

Asked whether Sebi is probing similar conduct by other high-frequency trading (HFT) or proprietary firms, Pandey played down concerns of wider malpractice. “On probing HFTs: Don’t think many other companies involved,” he said. “There may not be many more such cases,” Pandey was quoted as saying according to agencies.

Nonetheless, Sebi is continuing its review of market behaviour on expiry days and has convened fresh analysis efforts. The regulator had previously asked the National Stock Exchange (NSE) to examine Jane Street’s trades as early as July 2024. Even after a caution letter was issued in February 2025, the firm allegedly persisted with its trading strategies, prompting Sebi’s enforcement action last week.

Sebi’s next steps, particularly in terms of structural reforms, surveillance upgrades, and potential scrutiny of other trading strategies, remain closely watched as it seeks to restore trust in one of the world’s most active equity derivatives markets.

[The Economic Times]