Chartist Talks: After Jane Street manipulation allegations, Hedged's Rahul Ghose outlines 4 measures SEBI may soon consider

Rahul Ghose is the Founder and CEO of Octanom Tech and Hedged

Given the magnitude of the Jane Street case and its impact on market confidence, it is likely that SEBI will continue to refine its regulatory framework, said Rahul Ghose of Hedged in an interview to Moneycontrol.

He outlined four potential measures that SEBI could consider including enhanced real-time surveillance and stricter reporting requirements for large proprietary and algorithmic traders; and encouraging longer-dated contracts and discouraging excessive short-term speculation.

Meanwhile, despite recent volatility, the technical outlook for both Nifty 50 and Bank Nifty remains constructive, though with important caveats, said the Founder and CEO of Octanom Tech and Hedged.

As an options trader, how do you view the recent Jane Street manipulation issue and SEBI’s interim order banning them from trading in Indian stock markets?

The recent SEBI interim order banning Jane Street from trading in Indian stock markets marks a watershed moment for the Indian derivatives landscape. As an options trader, I view this development as both a cautionary tale and a necessary regulatory intervention. SEBI’s detailed investigation revealed that Jane Street engaged in aggressive, coordinated trades—particularly on Bank Nifty expiry days—designed to sway index levels and profit from resultant options price movements. Over a two-year period, Jane Street reportedly controlled nearly a quarter of the options volume and amassed over Rs 43,000 crore in gains, a significant portion of which SEBI alleges was earned through manipulative means.

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As an options trader, this spawns several key concerns:
• Erosion of trust: When algorithmic strategies distort benchmarks, retail and even experienced traders get disadvantaged.
• Unequal playing field: Smaller proprietary desks and individuals lack the firepower to counteract such aggressive flows.
• Systemic ripple effects: As seen, brokerages and liquidity providers felt immediate stress, evidenced by sharp stock price reactions in Angel One, BSE, CDSL, and Nuvama.

SEBI’s swift action—freezing Jane Street’s accounts, ordering disgorgement of illicit profits, and barring all related entities—sends a strong message about the regulator’s resolve to uphold market integrity. For market participants, this episode underscores the importance of robust surveillance and the risks posed by unchecked concentration of trading power.

Do you think SEBI will tighten regulations further to curb expiry-day volatility and prevent potential manipulation by firms like Jane Street?

SEBI has already taken proactive steps to address expiry day volatility, a key concern highlighted by the Jane Street episode. In May 2025, SEBI mandated that all equity derivatives contracts can only expire on either Tuesday or Thursday, with each exchange allowed just one weekly benchmark index options contract on their chosen day. This move aims to reduce the clustering of volumes and hyperactivity on expiry days, which can amplify volatility and create opportunities for manipulation.

Given the magnitude of the Jane Street case and its impact on market confidence, it is likely that SEBI will continue to refine its regulatory framework.

Potential measures could include:
• Enhanced real-time surveillance and stricter reporting requirements for large proprietary and algorithmic traders.
• Tighter position limits and margin requirements, especially around expiry.
• Greater transparency in order flow and trade reporting, particularly for high-frequency trading firms.
• Encouraging longer-dated contracts and discouraging excessive short-term speculation.

SEBI’s recent actions and public statements indicate a clear intent to prioritize market stability and investor protection, even if it means imposing stricter controls on sophisticated market participants.

Is the trading ban on Jane Street a significant relief for Indian proprietary trading desks?

The immediate reaction among Indian proprietary trading desks is mixed. On one hand, the exit of a dominant player like Jane Street—who at times accounted for nearly 50% of options trading volumes—reduces direct competition and may open up more opportunities for domestic firms. It also levels the playing field, as many Indian desks lack the technological and capital firepower of global HFT (high-frequency trading) giants.

However, there are concerns about the broader impact on market liquidity and trading activity. Jane Street’s presence contributed significantly to options volumes and market depth. Their abrupt exit could lead to:
• Lower liquidity, wider bid-ask spreads, and potentially higher transaction costs.
• Reduced counterparties for large trades, making it harder for other desks to execute complex strategies.

However, in the long run, the ban is likely to foster a more transparent and competitive environment, but the transition may be challenging for both proprietary and retail participants.

Given the recent sharp uptrend, do you believe the downside risk for the Nifty 50 and Bank Nifty is now limited, supported by strong technical levels?

Despite recent volatility, the technical outlook for both Nifty 50 and Bank Nifty remains constructive, though with important caveats. The Nifty 50 has key support in the 25,300–25,250 zone; holding above this level is crucial for sustaining the uptrend. A breakdown below this could see the index test 25,000 or lower, but if it remains above 25,200, the risk of a deeper correction appears limited.

For Bank Nifty, immediate support is 56,500, with further support at 56,300 and 56,000. The index continues to trade above its 20-day moving average, and technical indicators suggest that the broader structure remains bullish, provided these support levels hold. Resistance is seen at 57,200 and 57,300, and a decisive move above these could reignite the uptrend.

Both Nifty and Bank Nifty are far from being overbought, which is overall a good sign for bulls.

Disclaimer: The views and investment tips expressed by investment experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.