For weeks, India’s securities regulator believed Jane Street Group LLC was collaborating on its high-profile market manipulation case. The US firm had asked for more time and documents to prepare for a September hearing. Then, on Wednesday, the trading giant blindsided the authority by filing an appeal.
While that was always within Jane Street’s rights, the timing caught the Securities and Exchange Board of India off guard. Officials became aware of the firm’s move only after news reports on the appeal, according to a person familiar with the case who asked not to be named discussing a private matter.
By surprising SEBI, Jane Street has ramped up tensions in a dispute that could influence how global trading firms like Citadel Securities and Jump Trading view the risks of operating in the world’s largest derivatives market by contracts traded. At the same time, the regulator faces fresh scrutiny of its internal processes. Past cases, including a probe into Reliance Industries Ltd. and its billionaire Chairman Mukesh Ambani, were partly overturned for lack of evidence.
“This appeal is a stress test for India’s market architecture,” said Kher Sheng Lee, co-head of Asia Pacific at the Alternative Investment Management Association. “Any ruling will echo across global trading desks and compliance playbooks.”
The New York-based trading firm is seeking to overturn SEBI’s July 3 order, arguing that it has been denied access to crucial documents it needs to fight accusations of market manipulation. More importantly, Jane Street said the regulator’s own surveillance department had already previously reviewed the same trades and found no evidence of manipulation in most cases.
SEBI is now preparing its defense before the Securities Appellate Tribunal in Mumbai, the person added. The regulator did not reply to an email seeking comment. A New York-based spokesman for Jane Street declined to comment.
The regulator in July accused Jane Street entities of using their trading and technology might to influence prices in India’s stock and derivatives markets on expiry days, booking hefty profits in the process.
In its appeal, the US firm said there were contradictions in SEBI’s investigation. It said the regulator’s surveillance department, in a December report, was unable to ascertain that Jane Street’s trades influenced the index and member stocks in a way that benefited its derivatives bets. That view was also echoed by the National Stock Exchange in its findings in November.
Jane Street also claimed SEBI denied it a full inspection of crucial documents, including emails between the NSE and a hedge fund manager who had first flagged the manipulation concerns to the regulator.
“It would be interesting to see how Jane Street uses this earlier examination report, which doesn’t have adverse inference regarding its trading,” said Avadhut Chavan, partner at IC RegFin Legal and who previously worked with SEBI. “The defense may highlight that same trades that were compliant with laws earlier have now been termed as illegal in the interim order.”
The regulator, for its part, may argue that the latest examination is backed by new evidence and analysis, and hence is different from earlier reports, he added.
The latest appeal has shed more light on SEBI’s tussle with Jane Street. India’s securities watchdog has been investigating the firm through several probes since last year.
Its Integrated Surveillance Department focused on trading periods between July 15, 2023 and Jan. 31, 2024. This division largely cleared the firm in its Dec. 11 report.
Days later, SEBI formed a new inter-departmental team comprising personnel from the same surveillance division and its Market Regulation Department.
This renewed investigation concluded that trading by Jane Street entities raised concerns about market integrity by “artificially influencing the price of the index” to benefit large positions in index derivatives. The firm did this by exploiting the lopsided nature of the Indian market, where derivatives trading volume could trump the cash market by hundreds of times, SEBI said in July.
In its appeal, Jane Street said SEBI’s July 3 order failed to mention that the surveillance review concluded there was no wrongdoing. Jane Street said it only learned of this finding while reviewing documents the regulator later provided for its defense.
The formation of this new team “raises serious questions about SEBI’s internal governance and the integrity of the investigation” that led to its July 3 interim order, Jane Street argued.
Prior to the appeal, the firm was scheduled to appear before SEBI on Sept. 8, which was delayed to Sept. 15. For now, Jane Street has requested a stay on further regulatory action in the case until its appeal is resolved, the filing showed.
Jane Street is seeking access to materials including email exchanges between SEBI board member Ananth Narayan, who signed the July order, and Mayank Bansal, on Nov. 21 and Dec. 17. Bansal, a Dubai-based hedge fund manager, is widely reported to have alerted the regulator about Jane Street’s trades in India.
Bansal said conversations between market participants and the regulator should remain private.
Meanwhile, SEBI has stepped up efforts to curb excessive speculation in the options market by capping intraday equity-index positions at 50 billion rupees in futures-equivalent terms. The regulator said the new framework is meant to support market making while preventing outsized expiry-day bets and ensuring orderly trading.
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