Jane Street's two strategies to game Bank Nifty, Nifty 50

Why is SEBI cracking down on Jane Street?

Domestic traders and brokers have been flagging the manipulation in the index for over a year. Moneycontrol reported that an HFT player was behind sharp index spikes as early as April 2024.

Further, in April 2024, the media reported about the dispute between Jane Street group and Millennium management involving trading strategy secrets related to the Indian stock market.

This disclosed that Jane Street had made $1 billion from trades in India’s equity derivatives market using a secret trading strategy. SEBI picked up and analysed the media reports and started its own investigation.

According to SEBI, after its investigation, Jane Street Group, along with its entities, made large and aggressive intraday trades that have “no economic rationale other than to manipulate the underlying indices, to benefit the … positions created or carried” out by Jane Street.

The National Stock Exchange had written an explicit advisory to Jane Street in February 2025. However, according to SEBI, it was disregarded, and further manipulation was seen in May 2025.

Therefore, SEBI passed this order saying, "The integrity of the market, and the faith of millions of small investors and traders, can no longer be held hostage to the machinations of such an untrustworthy actor."

What does this mean?

Simply put, using its large capital and algorithms, Jane Street manipulated the Bank Nifty and Nifty 50 indices to make a tidy profit. SEBI outlined two strategies used by Jane Street to manipulate the indices, ‘Intraday Index Manipulation’ and ‘Extended Marking the Close’.

Intraday Index Manipulation

In a depressed market, Jane Street group would usually purchase Bank Nifty constituents in the cash and futures markets in significant quantities. This, in turn, would send the prices soaring.

For example, on January 17, 2024, Jane Street accumulated positions of Rs 4,370.03 crore in Bank Nifty constituents across both the cash and stock futures markets. Further, in all the scrips Jane Street contributed 15–25 percent of the entire market's traded value, which according to SEBI is a remarkably dominant share/ concentration.

As a result, in the options market, Bank Nifty index’s Put options became cheaper, while Call options became expensive.

As traders and other investors pile into the rising trend, Jane Street would purchase cheap Put options and sell expensive Call options, building a bearish position in the index. On the same day, January 17, 2024, Jane Street built Rs 32,115 crore in a bearish position.

Following this, Jane Street would reverse its position and sell all of its cash/futures position in Bank Nifty constituent stocks. According to SEBI, the sales would be aggressive, in a manner that pushes down prices in the component stocks and hence index.

Ultimately, Jane Street would have to book losses in intraday cash/futures market trading. However, it would profit from the Bank Nifty index options. SEBI noted that the profits in index options more than compensated for Jane Street’s losses in intraday cash and futures trading.

Marking the Close

This was Jane Street’s lesser used strategy, used in six of the 21 sessions detailed by SEBI. The trading firm would remain quiet for the most part on these days, between 9:15 a.m. to 2:30 p.m., making small trades to avoid drawing attention.

Then, in the last hour of trade, they make big moves, building large positions in index options, while also aggressively buying in cash and futures markets of index constituents. This sudden activity pushes the market in the direction Jane Street wanted, allowing them to book a tidy profit.

SEBI also shared the details of how much profit Jane Street made on the index expiry days and what strategy was used on the day.

What’s next?

SEBI has said it will impound Rs 4,840 crore from Jane Street, which it said were the 'unlawful gains earned' from the alleged misconduct. On the other hand, Jane Street has said it disputes the findings of the SEBI interim order barring it from the securities market and will further engage with the regulator.

However, SEBI added, that if after detailed investigation, “it transpires that the market was in fact not manipulated by Jane Street, the alleged illegal gains that have been impounded will be released for their use and they shall be free to continue with their business”.

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