Restrictions on Jane Street in India curb options trading activity; anticipated recovery in the coming fortnight
The Securities and Exchange Board of India (SEBI) has imposed a ban on Wall Street trading giant Jane Street, resulting in a significant contraction of the Indian options market. The ban, imposed on July 4, 2025, has impacted trading volumes and market dynamics, particularly on major exchanges like the National Stock Exchange (NSE) and the Bombay Stock Exchange (BSE).
SEBI accused Jane Street of manipulating stock indices, specifically through aggressive intraday buying and selling of Bank Nifty stocks, to benefit from substantial profits in index options trading. The regulator impounded ₹4,843 crore in alleged unlawful gains and froze about $567 million of Jane Street’s funds linked to these manipulative trades.
Since the ban, there has been a notable decline in options market volumes on the NSE and BSE. The index options premium turnover, a key indicator of liquidity and risk appetite, has dropped in most trading sessions following the ban. Jane Street reportedly earned over ₹36,000 crore in profits between January 2023 and March 2025, primarily through options trading strategies that SEBI deemed manipulative. The withdrawal of such a large participant has temporarily shrunk market activity and reduced liquidity.
However, market participants and experts expect a rebound in the coming weeks as other large institutional investors step in to fill the liquidity void left by Jane Street. Legal experts note that Jane Street is likely to challenge SEBI’s interim ban, but immediate relief is unlikely. The Securities Appellate Tribunal may direct SEBI to pass a final order within a specified time frame, but the interim ban is probably to remain in force while broader market implications are considered.
The episode has prompted SEBI to adopt tighter regulatory measures concerning foreign institutional investors and strategies involving high-frequency and aggressive trading in index options, which might reshape market oversight and add some caution to market recovery.
Shitij Gandhi, senior research analyst - technicals at SMC Global Securities, states that the dip in index options activity reflects growing market jitters, triggered by the Jane Street ban, global tensions, and shifting trade policies. Rajesh Baheti, managing director of Crosseas Capital Services, a Mumbai-based proprietary trading firm, expects the ripple effects of the Jane Street episode to linger in the near term, with index options activity showing a noticeable dip.
Kranthi Bathini, director of equity strategy at WealthMills Securities, suggests that while a dent in trading activity is inevitable due to Jane Street's dominance in derivatives, the decline in Bank Nifty volumes can't be fully explained by this saga alone. Baheti believes this dip may be temporary and if proprietary trading firms regain confidence in market transparency and regulatory clarity, activity could rebound meaningfully within four to six weeks.
Despite the immediate impact, the Indian options market is expected to recover as other investors increase their activity, and regulatory scrutiny and market structure changes are expected to persist as a consequence of this incident.
- The Securities and Exchange Board of India (SEBI) has restricted Jane Street's trading activities due to manipulating index values, particularly in Bank Nifty stocks, affecting the Indian options market significantly.
- The ban on Jane Street has resulted in a decrease in trading volumes and a shift in market dynamics on major exchanges like the National Stock Exchange (NSE) and the Bombay Stock Exchange (BSE).
- SEBI has confiscated approximately ₹4,843 crore and $567 million of Jane Street's funds associated with the manipulative trades.
- The dip in index options activity is not only due to the Jane Street ban but also because of growing market jitters caused by global tensions and shifting trade policies, according to Shitij Gandhi, senior research analyst at SMC Global Securities.
- Rajesh Baheti, managing director of Crosseas Capital Services, predicts that the effects of the Jane Street episode will persist in the near term, with index options activity showing a noticeable decline.
- Kranthi Bathini, director of equity strategy at WealthMills Securities, indicates that while trading activity may decrease due to Jane Street's dominance in derivatives, the decline in Bank Nifty volumes cannot solely be attributed to this event.
- Experts expect the Indian options market to bounce back as other investors increase their activities and market recovery is facilitated through stricter regulatory measures and changes in market structure.
