Jane Street deposits Rs 4,844 crore in escrow account following SEBI derivatives market probe

Mumbai: Jane Street has complied with an interim regulatory order and deposited ₹4,844 crore in an escrow account, after the Securities and Exchange Board of India (Sebi) probe into the New York trading firm revealed alleged instances of manipulation in the local derivatives market.

The decision came as a surprise to market participants, as it is rare for firms accused of violations to deposit such a large sum to comply with an ex-parte, interim order. "Jane Street's action in depositing this amount could be with the intention to establish its bona fides," said a senior Supreme Court lawyer, who declined to be named.

Sebi is examining the firm's request to lift the trading ban on it. The regulator will issue directions to intermediaries, including stock exchanges and depositories, to lift restrictions of the interim order, said people aware of developments, adding that Jane Street deposited the money on Friday. This was verified by the regulator on Monday.

Agencies

Derivatives Market Hit

Three days after the curbs were imposed, Jane Street had told its staff that Sebi's order reflects a "misunderstanding of standard hedging practices and the interrelationships between derivative and underlying markets."

It had then said Sebi's claim that the firm's activity is "prima facie manipulative" disregarded the role of liquidity providers and arbitrageurs in markets.

Sebi had barred Jane Street from trading in Indian markets after its order alleged index manipulation, involving bank shares and Bank Nifty index futures and options.

The high-frequency trader was told it would be allowed to restart trading if it deposited Rs 4,844 crore, which the regulator had estimated to be "unlawful gains" from the allegedly manipulated trades.

Legal Options
Lawyers said that even though Jane Street complied with Sebi's interim order, the firm would still provide a formal reply to the regulator, rebutting the allegations. Jane Street also has the option to challenge Sebi's findings at the Securities and Appellate Tribunal (SAT).

Sebi confirmed that despite Jane Street's action, the firm reserves its legal and equitable rights and remedies.

"Based on a reading of the Sebi order, the trading ban would be lifted on the deposit of the amount mentioned. However, trades would be subjected to accentuated scrutiny by the exchanges and also subject to the no-fraud rule," said Sandeep Parekh, managing partner at law firm Finsec Law Advisors. "On an operational basis, Sebi may have to instruct the exchanges and depositories to lift the previous ban, but that would simply be the plumbing of the order."

The derivatives market has been impacted by Jane Street's absence. After the July 3 Sebi order, the National Stock Exchange (NSE) saw a significant drop in daily average turnover for index options trading, of about 17%, in the previous week.

Sebi's investigation showed that the trading firm was engaged in manipulative trades on the expiry days of Bank Nifty derivatives that pushed the outcome in their favour.

According to the probe, the manipulation by Jane Street occurred on expiry days of index options. Sebi has accused Jane Street of manipulating shares and futures prices to make outsized profits through options on these days.

Sebi invoked the prohibition of unfair trade practices regulation for market manipulation, which covers any act or practice. It focused on Jane Street's trading data of about 20 days showing highest profits.

Some legal experts said Sebi didn't analyse Jane Street's full data, involving millions of trades. "It picked the winning days out of many days of winning and losing trades," said a lawyer.

The regulator will issue a final order after concluding its investigation and hearing Jane Street.

The company has made over Rs 43,289 crore profit in index options and Rs 7,687 crore in losses across stock futures, index futures and cash markets on the NSE between January 2023 and March 2025, according to Sebi.