Jane Street To Fight SEBI's Market Manipulation Charges, Calls Allegations 'Inflammatory' – Report

US-based global trading powerhouse Jane Street has decided to formally challenge the Securities and Exchange Board of India’s (SEBI) finding that the firm manipulated Indian benchmark indices for profit.

According to an internal email sent to employees and reviewed by Reuters, Jane Street expressed strong dissatisfaction with SEBI’s recent action, calling the allegations “extremely inflammatory.”

The Indian regulator had on Friday barred Jane Street from buying and selling securities in India and ordered the seizure of $567 million of its assets. The action followed a two-year-long probe into what SEBI believes were manipulative trading patterns in India’s Bank Nifty index.

'Deeply Upsetting' Allegations, Says Firm
“It’s deeply upsetting to see the firm mischaracterised this way,” the company said in the internal memo. “Once again, we left this process feeling that we had reached an understanding of the concerns and reflected them in modifications to our trading behaviour.”

Jane Street also claimed it had made repeated efforts to communicate with SEBI since February but was “consistently rebuffed.”

The Financial Times was the first to report on Jane Street’s plan to contest SEBI’s findings.

Allegations Rooted in Bank Nifty Trading
According to SEBI’s order, Jane Street allegedly engaged in a strategy where it purchased large quantities of Bank Nifty index constituents in both cash and futures segments during early market hours. Simultaneously, the firm built large short positions in Bank Nifty options, allegedly profiting from the artificial support to the index.

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A source familiar with the matter told Reuters that SEBI has now widened its investigation to include Jane Street’s trading activity across other indices and exchanges.

Market Implications
India’s capital markets watchdog has intensified surveillance of the derivatives market amid rising concerns of manipulation. India now leads the world in equity derivatives trading, accounting for nearly 60% of global volumes in April, according to the Futures Industry Association.

SEBI did not respond to Reuters' request for comment outside of working hours.

As the case unfolds, Jane Street’s formal rebuttal is expected to spark intense scrutiny and debate over the integrity of India’s derivatives markets and the challenges of regulating global algorithmic traders in emerging economies.

(With Inputs From Reuters)