Jane Street’s SAT appeal says Sebi sat on escrow, algo firm’s no-trade conduct out of good faith

Jane Street to SAT: SEBI sat on escrow, ignored inputs; our no-trade conduct shows good faith

Global trading firm Jane Street in its appeal before the Securities Appellate Tribunal (SAT) has submitted that it deliberately refrained from fresh trades even after regulator Sebi’s restrictions were lifted, underscoring what it described as bona fide conduct, documents seen by Moneycontrol have revealed.

The firm, which deposited Rs 4,843.5 crore in an escrow account as directed by Sebi, said its restraint reflected ‘abundant caution’ despite strongly disagreeing with the regulator’s findings. Some market participants have viewed this as a positive gesture from Jane Street, reflecting the firm’s intent to remain in good faith with the regulator and exchanges.

In its petition, Jane Street levelled multiple charges against Sebi’s process:

1. Ignoring prior submissions

The firm stressed that it had voluntarily explained its trading strategies to Sebi well before the interim order. Representatives of Jane Street entities held multiple calls in August 2024 and presented via video conference on August 20, 2024, giving regulators an overview of its index options strategies and specific explanations of trades on October 18, 2023, and January 17, 2024.

Jane Street argued that this information was ignored by the inter-departmental team formed on December 31, 2024, which prepared the order without the benefit of those prior inputs.

2. Lack of regulatory guidance

Jane Street said it had repeatedly sought clarity from Sebi and NSE about what constituted ‘large’ delta exposures after being cautioned on its positions. Sebi’s own notes, the firm claimed, showed that NSE had in February 2025 sought guidance from Sebi on this very issue, but no instructions were ever communicated back. The firm maintained that this absence of regulatory direction left its bona fide attempts at compliance unacknowledged.

People familiar with regulatory matters suggest that such guidance may not be necessary, as entities are expected to interpret it themselves by analysing trade data and patterns. There are also concerns that, at times, any guidance provided could later be used against them.

Also Read: Jane Street challenges SEBI in SAT; hearing on September 8

3. Withholding of key documents

Jane Street said several crucial documents, email correspondences, and annexures referenced in Sebi’s internal notes were never shared with it. According to the firm, some of these communications appeared to have been exchanged after reports from NSE and Sebi’s Integrated Surveillance Department (ISD) had initially found no evidence of manipulation. Despite this, Sebi later reversed its stance.

Jane Street also complained that Sebi closed the inspection process unilaterally, denying it access to what it described as ‘the most relevant and material documents’. As per Jane Street’s appeal, Sebi claimed these documents and emails as internal communication and denied access.

4. Delay in lifting restrictions

Jane Street has alleged intentional delay by Sebi in acknowledging the escrow deposit. The firm argued that the July 3 interim order had provided for an automatic lifting of restrictions once the deposit was made. However, the market regulator allegedly took 10 working days to restore its trading rights, even after receiving Rs 4,843.5 crore in an account marked in its favour. The firm contended this delay caused undue prejudice and undermined procedural fairness. Legal experts had then questioned the unusual delay from Sebi, as the issue was taking much more time than anticipated.

Counter view

But there are counter views as well. Some of the issues raised by Jane Street may be valid but not all can be relied on completely, said one legal expert. One former regulatory official said investigations are dynamic by nature. “In the course of investigation, there is no pre-conceived line. The direction of investigation changes as new facts emerge. So, questioning why Sebi abandoned the previous report may not be justified.”

Also Read: Sebi Chairman urges listed banks to strengthen insider trading compliance, follow two SDD structure

Sebi's stance

In its July 3 interim order, SEBI alleged Jane Street manipulated index options by exploiting its financial muscle and trading technology to influence prices in both futures and cash markets on expiry days. The order said this resulted in ‘egregious distortion’ of fairness in the securities market, marking a rare case where multiple liquid stocks with high retail participation were allegedly manipulated to benefit index option positions.

The case will next be heard by the SAT on September 8. Interestingly the next date scheduled for hearing before SEBI WTM is scheduled for September 15.

Jane Street declined to comment on the issue. An email seeking comments from Sebi did not elicit any response.