Both episodes are poised to cast a long shadow over India’s regulatory framework. But it's the Jane Street saga, marked by the unprecedented seizure of Rs4,843 crore (US$570mn - million) in alleged unlawful gains, that is more likely to expose contradictions, gaps and limitations of SEBI’s enforcement capacity and morph into a test of regulatory credibility on the global stage.
A Swift Payment, a Quick Resumption
Late on Monday, SEBI allowed Jane Street to resume trading, barely a week after it passed an interim order impounding its profits. Jane Street, for its part, had acted with surprising alacrity in depositing the disputed sum into an escrow account and requesting permission to resume operations. It didn’t challenge SEBI’s order in public. SEBI has obliged, putting the onus on exchanges to ‘monitor’ the firm to prevent future manipulation. In fact, it has little choice but to follow due process, despite its dramatic action. (Read: Jane Street Resumes Derivatives Trading in India After SEBI’s Rs4,843 Crore Escrow Compliance) “We will all be watching every day like a hawk,” said a SEBI insider. But the manner of enforcement, including whether SEBI has the capability to mount effective online surveillance across exchanges as well as the investigation itself, throws up far more questions than answers.
SEBI’s Curious Silence and Political Apathy
Unlike the long, adversarial stand-off with the National Stock Exchange (NSE) since 2015, when the Exchange decided to challenge every SEBI order, Jane Street’s tactical compliance defuses pressure on SEBI to either complete a thorough investigation or deliver a robust, appellate-proof final order. This creates an odd situation: an interim order, an extraordinary penalty and a rapid resumption of business.
More troubling is the deeper democratic failure that it throws up. India’s Parliament, with its routine walkouts and performative protests, is largely silent and clueless about the two issues. No serious questions have been raised about SEBI’s inconsistent enforcement, the structure of India’s derivatives markets, or the opaque nature of foreign portfolio investment (FPI) flows, beyond those pertaining to the Adani group. Let’s break down what is troubling for Indian investors and market participants.
Timeline Raises More Doubts
SEBI began investigating Jane Street only after global headlines in April 2024 that the firm had sued two former employees in the US for stealing proprietary trading strategies that had earned it over US$1bn (billion) in India in just one year. SEBI then directed the exchanges to examine Jane Street’s trades on 23 July 2024.
NSE submitted its findings on 13 November 2024, flagging manipulative trading on expiry days that distorted Bank Nifty index options and settlement prices. SEBI took another seven months to conclude that Jane Street’s trades violated its Prohibition of Fraudulent and Unfair Trade Practices (PFUTP) regulations. This, too, is based on a partial probe.
The timeline raises a fundamental question: For a regulator that touts its artificial intelligence (AI)-based surveillance tools and sophisticated market analytics in every annual report, why did SEBI need a court case, a media report and NSE’s investigation to act? Is SEBI really equipped to spot manipulation independently, despite continuous claims of investing in surveillance software since 2006? Why is it still dependent on exchange-led investigations?
BSE’s Role: The Mystery Deepens
Strangely, SEBI’s interim order focuses only on Jane Street’s trades on the NSE. Reliable sources told me that SEBI also instructed the smaller Bombay Stock Exchange (BSE) to investigate Jane Street and issue a caution letter on 6 February 2025. Jane Street’s trades on the BSE are entirely missing from the public order. It is also unclear if it also trades on a third exchange, Metropolitan Stock Exchange of India (MSEI).
There’s more: Jane Street’s entry into India came not through NSE, which is the fifth largest exchange in the world, and has a near monopoly in derivatives trading. The global company first registered on the BSE and the MSEI in 2021. The NSE registration happened only in 2023. This raises the possibility that the firm took positions across multiple exchanges, perhaps opposite ones, which have not even been investigated. While SEBI can act on the findings of one exchange, it needs internal capability and systems to track trading across three exchanges. This is, perhaps, why the SEBI order is silent about BSE and MSEI.
JSI Investments: Big Money, Tiny Footprint
The entity at the centre of this drama is JSI Investments Pvt Ltd (CIN: U67100MH2020FTC351153) registered in India in December 2020 with an authorised capital of Rs4,500 crore and a paid-up capital of about Rs1,290 crore.
The order mentions a second entity, JSI2, incorporated as a subsidiary of JSI in September 2024. JSI2 (U64990MH2024PTC432103), listed at the same address, has an authorised capital of Rs2,000 crore and a paid-up capital of Rs860 crore. It lists Shradha Shah, John Steven Mackenie and Saksham Bhalothia as directors. Both entities operate collectively under Jane Street group along with the two foreign companies.
Despite such large capital, the JSI group has a negligible physical presence in India. It doesn’t even lease or own an office in India. Its listed address, at Level 6, 4th North Avenue, Maker Maxity, G Block, Bandra Kurla Complex, is a co-working space run by Coworking Café. According to sources, only the compliance officer, Shradha Bharat Shah, is based in India with some administrative staff. Veteran SEBI officials say foreign entities are usually required to maintain a leased or owned local office. Was this condition waived or ignored? This seems strange, especially when the firms collectively hold over Rs15,000 crore in Indian government securities as liquid margin collateral to back their massive operations.
More astonishingly, when asked about the sketchy domestic presence for such a large operation, I was told that once a foreign entity is registered on one exchange (in this case, the smaller MSEI and BSE), others accept its address details without further question. This suggests that foreign investors remitting billions of dollars overseas as profit face lighter scrutiny than Indian citizens opening a savings account. Is the Reserve Bank of India (RBI) or the Union finance ministry (MoF), which refuses to check harassment over know-you-customer (KYC) laws, ostensibly to prevent money laundering, okay with this?
What Exactly Is JSI Doing?
JSI’s primary broker is Nuvama Wealth Management (formerly Edelweiss Securities). It also trades through heavyweights like BNP Paribas, JP Morgan India, Goldman Sachs India and Macquarie. Its massive trading activity, with a tiny Indian footprint and general lack of information with the regulator and exchanges, indicates that there is little ‘fit-and-proper’ assessment of key management persons.
The real concern is that this structure, which is a mix of Indian incorporated entities and FPIs operating as a single entity through Hong Kong (says SEBI), creates huge potential for regulatory arbitrage and exploitation of structural loopholes. This is at the cost of Indian traders.
So, What Next?
Jane Street now has two options. It can accept SEBI’s findings and present its case to the regulator and await a final order. Or, it can challenge the interim order before the securities appellate tribunal (SAT) after waiting for a while for SEBI to close the investigation. Either way, the clock is ticking for the regulator.
If SEBI loses the case, or fails to prove its allegations, it would mean global embarrassment for India. It is one thing to bungle the investigation into Adani group’s price manipulation and quite another to freeze thousands of crores of rupees of a foreign portfolio investor (FPI) operating in 45 countries but fail to substantiate the charges.
The Jane Street case highlights a wider malaise. India’s Parliament and Opposition parties have failed to hold the government or financial regulators accountable. Whether it’s the silent collapse of two giant finance companies in 2018 and 2019, massive loan write-offs by public sector banks (PSBs), or the Adani saga, economic oversight has all but disappeared from the political agenda.
This silence allows regulators, exchanges and financial conglomerates to exploit systemic weaknesses, so long as retail investors continue to generate volumes, and the taxman collects transaction taxes. This is clear from the fact that there is no attempt to fix the market structure, where income is derived from frothy, casino-like trading without depth. Doing so could lead to lower profits for exchanges, less tax for the government and fees to the regulator, and hence remains untouched (Read: Derivatives Market: Why the Casino Must Thrive with or without Jane Street).
It’s not just Jane Street that’s in the crosshairs. It’s SEBI’s credibility and, by extension, the integrity of Indian markets.
Very intelligent move by Jane street to remain silent on the decision of SEBI and even complying with it. Almost in all cases including NSE case, all management have tried to fight regulators in public forum and complicating the matters further leading ego clashes also. After all, it was only an interim order only. And SEBI obliged by resuming trading. All industrialists and businessmen must learn these all simple yet effective tactical moves rather than fighting with regulators all the time.
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