Jane Street India unit saw trading gains soar 494% before curbs

Net trading gains after accounting for transaction charges stood at Rs 4,700 crore for the year, compared with Rs 790 crore the previous year. Bloomberg

• Jane Street India's trading gains surged nearly six-fold to $517M last year.
• SEBI accused Jane Street of market manipulation; firm has appealed the findings
• Trading firms posted strong profits in India despite regulatory scrutiny.

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Jane Street Group LLC’s unit in India reported an almost six-fold jump in trading gains for the financial year ended March before its operations were brought to an abrupt halt by the regulator on allegations of market manipulation last year.

Net trading gains after accounting for transaction charges stood at 47 billion rupees ($517 million) for the year at JSI Investment Pvt. — a unit of Jane Street Group — compared with 7.9 billion rupees the previous year, filings with the Indian government showed. After-tax profit was 28.4 billion rupees, up 494% from a year ago.

The financial results cast new light on the scale of Jane Street’s trading operations in India, where the company is currently facing investigations by the stock market regulator. The confrontation between the Securities and Exchange Board of India and one of Wall Street’s most successful trading firms has drawn global attention, prompting heightened scrutiny of such outfits in other markets, including China.

Other trading firms including Hudson River Trading LLC and Optiver Holding BV also posted strong profit growth in India despite regulatory curbs, showcasing their agility in tapping opportunities across the country’s equity market. Following the probes, many companies shifted away from high-frequency options strategies.

Trading Probes

New York-based Jane Street was accused by SEBI of manipulating the local stock market in a July 3 interim order. The regulator added that the company made more than $4 billion in profits by trading stocks, futures and options in little over two years through March.

Jane Street previously said it disagrees with the findings of SEBI’s interim order. It has filed an appeal with a Mumbai court seeking information it said is crucial to its defense. The trial is set for Monday.

Representatives of Jane Street last year met with the Treasury Department, Commerce Department and the Executive Office of the President to discuss Jane Street’s operations in India, according to lobbying disclosures and people familiar with the matter, who asked not to be named discussing non-public information.

In the meantime, the Indian regulator is examining additional trading strategies used by Jane Street, including allegations that the firm manipulated the country’s main equity index to profit from an options strategy commonly known as a “short straddle,” people familiar with the investigation have said.

A unit of JSI Investment, which was also named in the SEBI order, reported a net trading loss of 1.5 billion rupees for the year ending March, a separate filing with the government showed. JSI2 Investment saw a capital injection of 8.6 billion rupees from its parent during the year, and had outstanding borrowing of 32 billion rupees in March.

The Indian units said that they are not engaged in any trading of securities and derivatives at the time of submitting their financials in December and will continue to evaluate the resumption of activities, the filings showed.