Jane Street ban cheered by Indian prop traders as SEBI targets expiry-day volatility

Jane Street ban cheered by Indian prop traders as SEBI targets expiry-day volatility

SEBI’s crackdown on the global quant firm Jane Street is being hailed by domestic traders as a step toward cleaner options markets and a potential revival in retail participation.

India’s proprietary traders are welcoming the Securities and Exchange Board of India’s (SEBI) interim order against US-based quant firm Jane Street, viewing it as a much-needed intervention to curb expiry-day manipulation and restore balance in index derivatives trading.

SEBI on July 4 accused Jane Street of manipulating the Bank Nifty index on January 17 using its Indian affiliate JSI Investments Pvt. Ltd., in violation of FPI rules that prohibit intraday trading. The regulator alleged that the firm used aggressive trades to influence prices of options contracts in its favour, generating $560 million in unlawful gains. The order has sent ripples through the trading community, but many domestic players say it’s a relief, not a disruption.

“This is a welcome move by SEBI. Such manipulation has been rampant for the last two years,” said Sourabh Sisodiya, Co-Founder and Head of Investment Strategy at Quantify Capital. “On expiry days, unusual spikes became frequent, a Rs 10 option would shoot up to Rs 300 to 400. Jane Street was a major player. The scale of manipulation was simply too much. Many prop traders are relieved.”

Pressure eases on local traders

For Indian prop desks that operate with far smaller capital pools than their foreign counterparts, the playing field has long felt skewed. Most domestic firms deploy a few hundred crore rupees at most — insufficient to counteract aggressive expiry-day moves driven by firms trading at global scale.

“Traders following genuine strategies will remain unaffected,” said James Kunnel, Derivatives Analyst at Asit C Mehta Investment Intermediates. “But those engaged in price manipulation are likely to be wary. We should see cleaner composition and more genuine price discovery.”

Traders could return

The volatility triggered by expiry-day manipulation has scared away a certain section of investors out of weekly options segments. Analysts say the SEBI crackdown could encourage them to comeback.

“With fewer price spikes and reduced volatility on expiry days, we may see more structured participation from traders again,” said an expert who requested anonymity for compliance reasons. “Jane Street’s actions were hurting even the well-informed and sophisticated individual traders.”

Sisodiya believes SEBI’s action sends a broader signal to large aggressive traders who had come to treat the final hour of expiry days as tactical ground. “Sharp expiry-day swings around 2:30 to 3:00 PM had become common. Now, they’ll know SEBI is watching,” he said.