MC EXCLUSIVE Sebi’s Jane Street order based on wider probe, sources cite legal precedent to withhold internal notes

Sebi’s Jane Street Order built on wider probe; sources cite legal precedent to withhold internal notes

The capital market regulator had based its interim order against Jane Street on a broader investigation than an earlier internal review, and provided the global trading major all data required under law, people familiar with the matter told Moneycontrol, adding that Sebi is well within its rights to withhold internal communications, citing past precedent of Securities Appellate Tribunal (SAT) rulings.

Emails to Sebi and Jane Street seeking comment went unanswered.

Jane Street has challenged Sebi’s order before SAT, questioning why the regulator discarded its own surveillance team’s findings that had cleared the firm of manipulation. The initial report, delivered on December 11, 2024, relied on a limited set of trades and recommended the matter not be pursued further. That report was drawn on an NSE analysis submitted to Sebi on November 13, 2024, covering a period of July 15, 2023 to January 31, 2024 and reviewed only first-hour cash segment trades and focused largely on checks for any sign of frontrunning.

By contrast, Sebi’s interim order on July 3, 2025 leaned on the findings of an Inter-Departmental Team (IDT) formed on December 31, 2024. The team examined full-day activity across stock cash, futures and options, analysing trades minute-by-minute to produce a broader picture of Jane Street’s strategies, Moneycontrol has learnt.

Jane Street had called the creation of the new team a “complete volte-face.” In its SAT plea, it said, “Following the ISD (Integrated Surveillance Department) report, for reasons that remain unexplained, the Respondent made a complete volte-face. On December 31, 2024, Sebi ordered the creation of an Inter-Departmental Team, purportedly to examine ‘concerns regarding trading patterns in index options around expiry day and matters related thereto.’”

The ISD report itself wasn’t fully endorsed internally, sources said, adding that the vertical head of the department had declined to sign off, prompting Sebi to expand the scope of inquiry.

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What Sebi Shared

For inspection, Sebi provided Jane Street the NSE report, the ISD report based on that analysis, and the IDT report that underpinned the interim order. The IDT report had explained why earlier findings were set aside by Sebi, the people aware of the development said.

At SAT, Sebi’s counsel argued, “We gave them our entire files… We are not going to give documents which we have not relied. We have already given much more than what we have to give. We have given them all reports. We have given them 10 GB of data.”

Past rulings have strengthened Sebi’s position. In Madhyam Agrovet Industries vs Sebi case, the SAT allowed inspection of show-cause notices but rejected demands for internal communications or correspondence with forensic auditors. The matter is pending before the Supreme Court. In Kavi Arora vs Sebi case, the Supreme Court had upheld Sebi’s decision to withhold portions of a forensic auditor’s report which Sebi claimed it did not rely on, implying if the data that did not form basis for outcome, it need not be shared. Case precedence, legal sources said, allows room for restrictive sharing of information based on the nature of information.

Jane Street’s Position

The firm initially sought more time to study the voluminous files before replying but later argued Sebi hadn’t provided key reports, a claim that was countered by Sebi. “They ask for time, we refused, so they filed this,” Sebi told SAT. Jane Street responded that with Rs 4,800 crore invested, it wasn’t intimidated by the hearings. Sebi in turn urged it to file a reply and explain the trades.

The firm also sought inspection of 61 documents, including internal and external emails, the original complaint, and clarity on what constituted “acceptable” delta exposure in index options. It said it had already deposited Rs 4,843.5 crore in escrow but restrictions were not lifted in time.

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Allegations in the Interim Order

In its July 3 order, Sebi alleged Jane Street used its trading, financial and technological heft to manipulate index options by influencing futures and cash markets on expiry days. “There has been an egregious distortion of integrity and fairness in the securities market,” the order said, adding that multiple liquid stocks with high retail participation were manipulated to generate “massive profits for the manipulators at the cost of other participants and retail traders.”

What Next

The SAT has given Sebi three weeks to explain why certain documents can’t be shared, with Jane Street allowed to file a rejoinder within three weeks thereafter. The matter is listed for hearing on November 18.