Jane Street Group representatives are scheduled to appear before the Securities and Exchange Board of India (Sebi) for a personal hearing in early September, according to people familiar with the matter.
This will be the high-frequency trading (HFT) firm’s first in-person interaction with the regulator since Sebi, in an interim order on July 3, barred it from trading for alleged market manipulation. The ban was later lifted after Jane Street deposited ~4,840 crore, which the regulator had identified as gains from disputed trades involving the Nifty Bank index.
Sebi had initially given the trading firm 21 days to respond to the charges outlined in the ex-parte interim order, a deadline that expired on July 26. On July 28, Jane Street sought an additional six weeks to submit its reply and prepare its defence. Legal experts said entities facing regulatory action can request personal hearings to supplement their written submissions.
Emails sent to Sebi and Jane Street remained unanswered until the time of going to press. Days after the order, Jane Street told employees in an internal note that its trading activity was “basic index arbitrage” and described Sebi’s findings as “fundamentally mistaken”.
According to Sebi’s order, Jane Street ran a two-part strategy: first, aggressively buying Bank Nifty constituent stocks in both cash and futures markets to artificially push up the index; and then unwinding those positions while holding large short bets in index options, profiting from the subsequent decline.
The story so far
- July 3: Sebi bans Jane Street in an ex-parte interim order; seeks impounding of ~4,843 crore; gives 21 days to submit response
- July 8: Jane Street, in an email to staffers, says practices in question were “basic index arbitrage trading”
- July 14: Says it has deposited ~4,843 crore in an escrow
- July 18: Sebi lifts trading ban on Jane Street
- July 28: Firm asks Sebi for more time to submit responses
Jane Street, however, maintains that its trades were conventional index arbitrage — exploiting price differences across instruments to provide liquidity and improve market efficiency.
In the second week of July, Sebi revoked the trading ban on the firm. Jane Street subsequently indicated that it did not intend to immediately resume trading in index options. The firm also retains the option of appealing before the Securities Appellate Tribunal (SAT), though experts suggest it may prefer to await Sebi’s final order before pursuing that route.
Adjudication proceedings in the case have begun, people aware of the matter said. This process typically involves multiple hearings and could take six to eight months to culminate in a final decision. Separately, Sebi has expanded its probe to examine potential manipulation in indices beyond the Bank Nifty.
“In proceedings before Sebi, especially in complex cases involving interim directions and large-scale trading allegations, personal hearings form a critical part of due process. The notice, in this case Jane Street Group, is entitled to make oral submissions and clarify its position before the whole-time member, beyond its written response. The hearing is not adversarial but inquisitorial in nature—it allows Sebi to examine the context, the strategy, and the intent behind the trades, particularly when algorithmic and expiry-day trading are involved,” explained Sumit Agrawal, Founder & Partner at Regstreet Law Advisors and a former Sebi officer.