Capital market stocks fell up to 7 per cent after Sebi’s interim order against the US-based trading firm Jane Street spooked investor sentiment
Shares of capital market-related companies came under pressure on July 4, 2025 after the Securities Exchange Board of India’s (Sebi) banned the US-based trading firm Jane Street from accessing India’s capital markets after an alleged market manipulation.
The regulator’s action against Jane Street sparked concerns of a regulatory clampdown in the Futures and Options (F&O) trading space, which led to a selloff in the shares of brokerage firms and exchanges.
Brokerage firms Angel One and Nuvama Wealth Management fell between 6 per cent and 7 per cent. Exchange firms BSE (formerly Bombay Stock Exchange) and Multi Commodity Exchange of India (MCX) fell as much as 6.12 per cent and 1.41 per cent, respectively. Depository services provider Central Depository Services Ltd (CDSL) also fell up to 2.26 per cent.
Sebi, in its interim order, said that Jane Street Group used aggressive, high-leverage strategies to sway index levels on weekly expiry days, specifically to gain from Bank Nifty options. According to the regulator, the firm used to place large-scale cash and futures trades to distort market signals to turn the index in a direction that worked in their favour.
As per the order, between January 2023 and March 2025, the Jane Street Group earned an aggregate profit of Rs 36,502 crore from trades on the National Stock Exchange (NSE). Of this amount, over Rs 43,000 crore came just from index options. The group also made some losses in the stock futures, index futures and cash segment.
Within the index options segment, Sebi's investigation found that Bank Nifty options alone contributed Rs 17,319 crore of profits for the group. This is nearly 40 per cent of the group's profits from index options.
Sebi has ordered the impounding of Rs 4,840 crore, which it claims are unlawful gains made by the Jane Street Group through alleged market manipulation. The regulator has also directed banks to freeze all outflows from the group’s accounts, without Sebi’s explicit approval.
Sebi’s interim order also flagged January 17, 2024 as Jane Street Group’s most profitable trading day, on which the group made gains of nearly Rs 735 crore.
The regulator then conducted a thorough review of all their trades executed on that day to understand how the profit was made and are there any patterns to it.
Sebi's analysis revealed that the group was engaged in, what it calls, “Intraday Index Manipulation” strategy, where the group’s trading activity appeared to influence index levels for profit.
This same playbook was reportedly used on 15 out of 18 trading days under review. On the remaining three days, Sebi said the group used a different strategy, which the regulator calls “Extended Marking the Close” strategy to manipulate the index options.
Interestingly, the latter strategy also showed up in Nifty options trading during May 2025.
Sebi further noted that the group’s trading was particularly focused around weekly and monthly expiry days, when volumes and positions in index options often tend to spike. Since the closing value of the index on these days directly determines the payout on options, it gave the firm both the motive and the opportunity to potentially influence the market in its favour.
Sebi has asked stock exchanges to keep a close watch on any future trades or positions taken by the Jane Street Group. The regulator wants to ensure the group does not engage directly or indirectly in any manipulative activity, especially using the trading patterns flagged in its order.
This surveillance will continue until Sebi completes its investigation and takes a final call on the matter.
Jane Street, however, disputed the findings of Sebi’s interim order.
“Jane Street is committed to operating in compliance with all regulations in the regions we operate around the world,” the firm said in an emailed response to Reuters.
“Jane Street disputes the findings of the Sebi interim order and will further engage with the regulator.”