*

India's top exchange says it gave regulator data on Jane

Street

in Nov 2023

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Regulator started informal examination into Jane Street in

second half of 2023, sources say

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Jane Street says it believes company is fully compliant

with

Indian law

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Jane Street currently not trading in India, spokesperson

says

By Jayshree P Upadhyay

MUMBAI, Aug 14 (Reuters) - More than four months before

India's market regulator began formally investigating Jane

Street for manipulation in April 2024, it received information

from the country's top stock exchange indicating unusual

activity by the U.S. trading giant, according to three people

familiar with the matter.

The National Stock Exchange (NSE) told Reuters that it had

provided the Securities and Exchange Board of India (SEBI) "data

and analysis on Jane Street as a consumer" beginning in November

2023. NSE did not provide more details, but the information

sharing - which came amid a separate preliminary probe by SEBI

into Jane Street's derivatives trading - began due to a

surveillance alert, the people said.

SEBI, which had launched its informal investigation in the

second half of 2023, quickly found itself challenged by the

voluminous and complex data generated by the high-frequency

trader's activities in India, two of the people said.

In the months between the preliminary examination and the start

of a formal investigation, mom-and-pop traders were bleeding

cash: Retail investors lost $21 billion trading derivatives over

a period of three years to March 2024, according to SEBI data.

Reuters interviewed eight people familiar with the probe,

including market sources and regulatory and exchange officials.

They described how SEBI struggled to respond to the explosion of

derivatives trading in India - the world's largest options

market as of 2023 - and how its dual obligations to police the

market and develop India's financial system deterred it from

quicker, bolder action.

The news agency is also reporting for the first time details

about SEBI's preliminary investigation, which came as retail

traders were driving the derivatives boom, with low-income

investors accounting for 76% of such trades in the year to March

2024.

Before starting its informal examination, SEBI had through its

market surveillance detected abnormal patterns in some of Jane

Street's trades, said two of the people, who like many others

interviewed for this story spoke on condition of anonymity to

discuss sensitive matters.

The regulator was concerned about the rush of less sophisticated

investors into the options market, but it also did "not want to

become a nanny state," the people said. SEBI at that time shied

away from action that it feared might spook markets, like

imposing a minimum income threshold for individuals to trade

derivatives, they said.

Instead, SEBI preferred to warn retail investors of the

risks: In May 2023, for instance, it asked brokers to display on

their trading platforms a warning that the vast majority of

individual equities options traders made net losses.

SEBI cracked down in July 2025, when it issued a 105-page

interim order barring Jane Street from the local market, in one

of the strongest actions it has taken against a foreign

investor.

Jane Street made $4.23 billion trading Indian derivatives

between January 2023 and March 2025, according to the regulator,

which alleges that $567 million of the profits were "unlawful

gains."

The regulator did not respond to Reuters' questions about

the time taken to launch a formal probe, but its July 4 order

noted that Jane Street executed its trades using entities in

different geographical locations.

That practice, which is unusual in India, added to the

complexity of the investigation, SEBI has said. In some cases,

regulators in other major markets have taken as long as two

years to complete complex investigations into suspected market

manipulation or insider trading.

In Jane Street's case, SEBI likely faced the challenge of

distinguishing between aggressive trading and manipulative

behavior, said former SEBI official Sumit Agrawal, now managing

partner of law firm Regstreet.

If its orders were challenged in court, it faced the high

bar of proving "not just impact, but intent," said Agrawal, who

left SEBI in 2016.

Jane Street, which denies the charges, says it was merely

exercising "basic index arbitrage trading." It has deposited the

$567 million of contested profits into an escrow account to

regain access to Indian markets, even as it reserves the right

to challenge the order.

A company spokesperson told Reuters that Jane Street

maintained its books and records in India and believed it was

fully compliant with Indian law. Despite having regained the

right to trade in India, the firm isn't currently doing so, the

spokesperson said.

India's derivatives market is moderating, Ananth Narayan, who

led SEBI's Jane Street probe, said on July 17. He attributed the

slowdown in part to cooling measures, which SEBI started rolling

out in late 2024 that targeted retail investors, such as

increasing the minimum size of contracts.

'UNFETTERED SPECULATION'

Jane Street's Indian operations took place amid the

unbridled post-pandemic growth of derivatives trading.

The notional value of derivatives traded in India in 2023

was 422 times the value of the cash market. In most other global

markets at that time, derivatives traded at between five and 15

times cash value.

In this volatile environment, Jane Street accumulated large

volumes of the constituent stocks of an index of Indian banks in

cash and futures markets, pushing index prices higher, according

to the SEBI order. In the mornings of days it engaged in such

trades, it also used derivatives to short the index, the

regulator said.

Later on such days, the firm then sold the shares in cash

and futures markets, SEBI said. Such was the size of Jane

Street's positions that it pushed down the price of the index,

thereby profiting from the shorts, the regulator said.

The alleged manipulation resulted "in massive profits for

the manipulators, at the cost of other participants and retail

traders," SEBI said.

Index-based derivatives grew exponentially without sufficient

guardrails, said G. Mahalingam, who served as a top SEBI

official until 2021. "This led the markets to go into unfettered

speculation."

NSE, the host of the index traded by Jane Street, thrived as

derivatives boomed in India.

It reported 135 billion rupees in transaction fees for its

latest fiscal year, up 32% from the year to March 2023.

Seventy-six percent of the transaction fees it charges are

related to options trading, its latest financial statements

show.

NSE made efforts to encourage trading, like setting up a

group composed of exchange officials and executives of

high-frequency trading firms, according to two people familiar

with the matter.

The firms use derivatives as a major part of their strategy and

could raise their concerns during meetings, the people said. The

group hosted meetings like one on Oct. 25, 2024 that was

attended by one of Jane Street's India top executives, according

to minutes of the conversation seen by Reuters.

At that meeting, the group discussed NSE's plans to increase

co-location capacity, allowing high-frequency traders to place

their computers closer to exchange systems to cut trade

execution times.

"It is estimated to triple the rack space in the next 2

years as NSE embarks on providing the necessary infrastructure

to support growth," the document said.

By the October meeting, NSE was aware that Jane Street was

under the regulatory spotlight. It had been directed by SEBI two

months before the meeting to scrutinize Jane Street's trades,

according to the July 2025 order, alongside having shared the

firm's data with the regulator for almost a year.

A NSE spokesperson told Reuters that in addition to sharing

data, it started issuing "detailed surveillance inputs" on Jane

Street's activity in April 2024.

When asked why it hosted the meeting with Jane Street

despite SEBI's concerns, the spokesperson said NSE "interacts

with all market participants ... to address queries and issues

within regulatory boundaries."

The exchange had no jurisdiction to take action against

investors, the spokesperson added.

Jane Street continues to walk a tight-rope, with tax

authorities reviewing documents across its local offices,

Reuters reported on July 31.

Some retail traders, however, feel that SEBI didn't go far

enough in its crackdown. Mumbai cab driver Govind Jha, 33, said

he stopped putting money into derivatives for a month out of

frustration that Jane Street had regained its ability to trade.

"How do I make money in such a market?" he said.