SAT hearing on Jane Street vs Sebi: Regulator says final order may be much wider, next hearing on November 18

Jane Street Vs SEBI in SAT: Matter to be heard next on November 18, SEBI asked to file reasons for not sharing documents

The Securities Appellate Tribunal (SAT) has directed market regulator Sebi to file a reply in three weeks explaining why it has not shared the documents requested by algo trading firm Jane Street and listed the next hearing of the appeal on November 18.

Jane Street had moved SAT against market regulator’s order barring the algo trading firm. In its argument, Sebi said that it had already supplied 10 GB of data to Jane Street. Sebi further said that the investigation is ongoing, and its scope may be much wider. Sebi counsel said, that scope of investigation may be much wider, "The period may be significantly larger. The scope of the show cause notice may enlarge significantly more than what is pointed out in the interim order". He argued that, as per the settled law Sebi is not required to give more than what it has relied upon.

Sebi argued that Jane Street is not disclosing its trading strategy and instead is demanding internal administrative circulars from the regulator. Sebi side also highlighted that, Jane Street wanted the details of the committee which issued the directive for formation of new investigation team, reasons for issuing such directives and the minutes of the meeting in which the decision to form such a team was taken.

The regulator submitted before the appeallete that the global algo trader has not filed its reply yet and is avoiding the hearing. Sebi’s counsel argued that the investigation is at a very critical stage, and the regulator will not give every single document method being demanded, calling it a phishing inquiry.

Jane Street countered by arguing that if Sebi can share reports of the NSE, which are not its own documents, then there is no reason it should not share its own documents relied upon to arrive at the regulatory action. Jane Street had sought around 61 documents from Sebi. Sebi side called the list of documents sought as "very large list".

Also read: Jane Street challenges SEBI in SAT

Jane Street questioned the rationale for formation of a new team for investigation. Jane Street argued that, most of the period and trades were covered already in the NSE and Sebi's surveillance department report which had found no manipulative practices by Jane Street. Jane Street asked,  why Sebi disregarded its previous investigation reports and did not share the copy of complaint it received from a Dubai based fund manager.

Sebi responded by stating that it has supplied only those documents that are relevant to the case and it is still in the process of passing a confirmatory order.

Tribunal heard the arguments of both sides and directed Sebi to file its reply for not sharing the desired documents in three weeks, and Jane Street can file any rejoinder in another three weeks period.

Jane Street had challenged Sebi’s interim order dated July 3 before the SAT on September 3. In its interim order dated July 3, Sebi had accused Jane Street of manipulating index options using its financial strength and technological edge. The regulator directed the firm to deposit Rs 4,843.5 crore in a separate account with a lien in Sebi’s favour. Jane Street complied on July 11. Sebi later lifted restrictions on the firm, while directing exchanges to closely monitor its trades.

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