SEBI’s July 4 crackdown on global proprietary trading giant Jane Street has led to a ripple effect across India’s derivative market. While traders and market participants are still gauging the fallout, Zerodha co-founder Nithin Kamath has offered one of the most candid and data-driven takes — praising the regulator’s resolve, but warning that the ecosystem’s deep reliance on proprietary volumes may now be tested.
In a post on X platform, Kamath wrote: “You’ve got to hand it to SEBI for going after Jane Street. If the allegations are true, it’s blatant market manipulation.” Kamath was referring to SEBI’s interim order that barred Jane Street and its Indian arm, JSI Investment, from trading in the Indian securities market. The order cited misuse of cash, futures and options trades to distort expiry-day pricing and impounded Rs 4,840 crore in alleged unlawful gains.
What surprised many observers, including Kamath, was the defiance implied in the order. “The shocking part? They kept at it even after receiving warnings from the exchanges. Maybe this is what happens when you're used to the lenient US regulatory regime,” he wrote.
“Think about the structure of U.S. markets: dark pools, payment for order flow, and other loopholes that allow hedge funds to make billions off retail investors. None of these practices would be allowed in India, thanks to our regulators.”
As he contrasted India’s regulatory environment with the US (where hedge funds and HFT players operate in a looser, more complex market architecture), he noted that proprietary trading firms like Jane Street are not marginal players but backbone of current F&O volumes.
You’ve got to hand it to SEBI for going after Jane Street. If the allegations are true, it’s blatant market manipulation.Related stories
The shocking part? They kept at it even after receiving warnings from the exchanges. Maybe this is what happens when you're used to the lenient U.S.… pic.twitter.com/pZGEnfnDXl
— Nithin Kamath (@Nithin0dha) July 4, 2025
“That said, there’s a flip side. Prop trading firms like Jane Street account for nearly 50% of options trading volumes. If they pull back — which seems likely — retail activity (~35%) could take a hit too,” he wrote.
This observation raises a key concern: while SEBI’s intent is to curb manipulation and restore fairness, the exit of major liquidity providers could lead to wider bid-ask spreads, higher volatility, and uncertainty in near-term participation. He wrote, “So this could be bad news for both exchanges and brokers.”
Jane Street has been among the most active players in weekly options — especially on expiry days — often taking large directional or volatility bets. Its sudden absence may now be felt not just in trading screens but also in broader sentiment.
Kamath closed his post by urging attention to actual market data in the coming sessions: “The next few days will be telling. F&O volumes might reveal just how reliant we are on these prop giants. I’ll share more data as and when anything interesting turns up.”
Kamath’s concerns about liquidity resonate with other market leaders, who see SEBI’s move as a pivotal moment for India’s derivatives market. Deepak Shenoy, founder of Capitalmind, likened Jane Street’s alleged manipulation to “a massive version of GameStop on India,” emphasising the scale of market distortion. Similarly, trader Piyush Chaudhry criticised the firm’s tactics on X, stating, "There was no genius at play, just sheer Money Muscle” used to exploit liquidity and rig expiry outcomes. These voices highlight the broader implications of SEBI’s crackdown, from curbing manipulation to reshaping market dynamics
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