Retail trading may be impacted if prop giants like Jane Street step back, warns Zerodha CEO

Zerodha CEO Nikhil Kamath

Zerodha founder and CEO Nithin Kamath has cautioned that retail trading activity could be impacted if proprietary trading firms like Jane Street, which contribute nearly 50 per cent of options trading volumes, scale back their participation in the market.

This development could have negative implications for both exchanges and brokers, he added.

"Prop trading firms like Jane Street account for nearly 50% of options trading volumes. If they pull back – which seems likely – retail activity (~35%) could take a hit too. So this could be bad news for both exchanges and brokers," Kamath said on X.

"The next few days will be telling. F&O volumes might reveal just how reliant we are on these prop giants," he added.

In an order released in the early hours of Friday, the market regulator found Jane Street (JS), a New York-based hedge fund, guilty of manipulating the indices by taking bets in the cash, and, futures and options markets simultaneously for making handsome gains.

It has barred the hedge fund from accessing the market and impounded over Rs 4,843 crore in gains. The probe has found that JS made a profit of Rs 36,671 crore on a net basis during the probe period from January 2023 - May 2025.

Kamath said that if the allegations against Jane Street are true, it's "blatant market manipulation" and despite warnings from the exchange, it continued.

"The shocking part? They kept at it even after receiving warnings from the exchanges. Maybe this is what happens when you're used to the lenient US regulatory regime. Think about the structure of US markets: dark pools, payment for order flow, and other loopholes that allow hedge funds to make billions off retail investors.

"None of these practices would be allowed in India, thanks to our regulators, You've got to hand it to Sebi for going after Jane Street," he added.