SEBI vs. Jane Street: Why Did Nithin Kamath Applaud and Should Retail Traders Worry?

Zerodha founder Nithin Kamath has come out in strong support of the Securities and Exchange Board of India’s (SEBI) probe into Jane Street, staing that the markets regulator deserves credit for pursuing what could amount to serious market manipulation. 

His remarks, posted on LinkedIn, reflect growing concern in market circles over how foreign proprietary trading firms conduct business in India.

“If the allegations are true, it’s blatant market manipulation,” Kamath wrote, reacting to reports that Jane Street continued with suspect trading practices despite repeated warnings from stock exchanges.

He went on to add, “The shocking part? They kept at it even after receiving warnings from the exchanges.” 

He suggested that the firm may have underestimated the Indian regulatory environment, accustomed as it might be to the more permissive structures in U.S. markets. 

“Maybe this is what happens when you're used to the lenient US. regulatory regime,” Noted Kamath, pointing to common practices in the U.S. like dark pools and payment for order flow—mechanisms that critics argue allow large firms to profit at the expense of retail investors.

“None of these practices would be allowed in India, thanks to our regulators,” he added.

It is pertinent to note that Kamath began trading stocks when he was introduced to the markets by his friends at just 17. He started trading in penny stocks. He had accumulated quite a bit of money by the time he finished his engineering degree from the Bangalore Institute of Technology.

Also Read: Thinking Of Investing In Unlisted Shares Like NSE Or Chennai Super Kings? Here’s Zerodha’s Nithin Kamath’s Big Warning | Republic World

Concerns over retail participation

While Kamath praised SEBI’s assertiveness, he also flagged a potential unintended consequence. According to him, Jane Street and similar firms play a significant role in India’s fast-growing derivatives market. 

According to Kamath, proprietary trading outfits like Jane Street account for nearly half of all options trading volumes. “If they pull back—which seems likely—retail activity, which makes up about 35%, could also be impacted. That’s bad news for both exchanges and brokers,” he noted.

Kamath said he would be watching derivatives activity closely in the days ahead to see if the impact of the ongoing probe plays out in real-time.

“F&O (Futures and Options) volumes might reveal just how reliant we are on these prop giants. I’ll share more data as and when anything interesting turns up,” he wrote.

Earlier, Kamath issued a strong warning to retail investors rushing to buy unlisted shares of popular companies like NSE, Chennai Super Kings, and Reliance Retail.