US-based firm Jane Street, known for its high-frequency trading strategies and dominance in global markets, has landed in hot water in India. The firm has been barred by SEBI, India’s market regulator, for indulging in manipulative trading practices that allegedly led to unlawful profits in the Indian stock market.At the heart of the controversy is Jane Street’s aggressive trading in the derivatives (futures) segment, where the firm executed trades designed not just to profit, but to sway the market itself. These strategies were anything but fair play — they were orchestrated efforts to influence prices in a way that allowed the firm to pocket massive gains.Jane Street is a proprietary trading firm, which means it trades with its own capital rather than managing client funds. Using this freedom, the firm allegedly made a staggering Rs 32,681 crore in profits, which were repatriated abroad, bypassing the spirit of market integrity.How it manipulated the marketAt first glance, Jane Street’s presence in the Indian markets seemed like that of any seasoned global investor — active in both the cash and derivatives segments, placing trades across major stocks and indices. But a closer look by SEBI revealed something far more calculated.According to the regulator’s findings, Jane Street’s trades, particularly in NIFTY index futures, showed a clear pattern. The firm wasn’t trading passively or reacting to the market — it was nudging prices upward, consistently placing orders at or above the last traded price (LTP). This pattern intensified in the final hours of trading, a critical window that often shapes the day’s closing price.SEBI described it as “non-neutral trading behaviour”, a strategic attempt to influence prices rather than simply engage with the market. And the tactic wasn’t random; it followed a well-known play in the trading world: “marking the close.”Jane Street, regulators say, was executing what’s known as an extended ‘marking the close’ strategy — placing large and aggressive buy or sell orders near the end of the trading session, with the intention of artificially moving the closing price of a stock or index. The closing price is critical, especially on derivatives expiry days, as it determines the settlement value for futures and options contracts.How Jane Street did thisStory continues below this adSEBI highlighted a telling example involving the BANKNIFTY index. In the early hours of trading, Jane Street loaded up, buying substantial quantities of BANKNIFTY stocks and futures. This buying spree helped prop up the index temporarily.Then, in a seemingly choreographed reversal later in the day, the firm dumped those same positions, aggressively selling what it had earlier accumulated. This push-pull tactic not only influenced the index’s trajectory during expiry but also positioned Jane Street for maximum gains.Adding another layer to the strategy was Jane Street’s Indian arm — JSI Investments Private Limited. While its trades in the cash market consistently ended in losses, its very presence served a purpose.Under Indian regulations, foreign portfolio investors (FPIs) are not allowed to conduct certain cash market trades like intra-day trading. By routing some transactions through this local entity, Jane Street effectively found a workaround without openly breaking the rules.Story continues below this adMeanwhile, the firm’s real activity continued in the futures and options market. The Indian entity’s losing trades made it appear as though Jane Street was complying with a caution notice issued by NSE in February 2025. But in reality, its manipulative strategies were simply relocated to the derivatives segment.What looked like scattered trading decisions was, in fact, a well-coordinated effort. Jane Street’s moves in index futures and stock-level trades worked together to support and steer the NIFTY index—especially near expiry, when even small movements can have massive financial implications. The play was subtle. The gains, massive. And the intent, according to SEBI, is unmistakably manipulative.Big moves, bigger profitsThe SEBI report reveals that much of the enormous amount of trading and position taking in F&O by the JS Group have been undertaken by the foreign portfolio investors in the JS group, and much of the profits arising from the prima facie manipulative schemes as identified in the 21 instances elaborated in the SEBI order have also been booked by them.In fact, during the examination period, the net profits booked in the FPIs in the JS Group amounted to Rs 32,681 crore, SEBI said. The magnitude of this profit is significantly higher than the average quantum of assets held by these FPIs in India as of the month ends between January and May, 2025, indicating that these profits have been repatriated.Story continues below this adSEBI last week ordered the impounding of Rs 4,843.57 crore in alleged unlawful gains made by Jane Street through alleged manipulative trading practices and restrained it from accessing the securities market.Jane Street brushed off regulatory alertsJane Street had ignored a prior warning from the National Stock Exchange four months earlier and continued with alleged manipulative trading activities.When concerns regarding allegedly manipulative trading practices by JS Group, a global proprietary trading firm, surfaced in early 2025, the NSE, acting under SEBI’s direction, issued a clear and formal warning to JS Group in February 2025. The notice advised them to avoid high-risk activity in index options and refrain from any trading behaviour that could indicate manipulation.In response, JS Group informed NSE in February 2025 of its assurance to fully comply with applicable regulations.Story continues below this adHowever, in May 2025, the group again executed what appeared to be manipulative “extended marking the close” strategies — entering large, aggressive trades in Nifty index options around expiry closing — to move the index in their favour. These trades, carried out in May, blatantly disregarded the warning letter issued by the NSE on February 6, as well as the group’s own formal assurance made to NSE that same month, according to the SEBI order.Proprietary trading and marketsSEBI’s recent action against Jane Street has sparked debate about the future of proprietary trading in India.“Retail participation in equity derivatives has surged from just 2 per cent in 2018 to over 40 per cent in 2025. This influx fuels liquidity, volatility, and, with it, opportunity. Proprietary trading desks thrive in such environments, leveraging high-frequency and algorithmic strategies,” said Dinesh Thakkar, Chairman and Managing Director of Angel One. “With millions of active retail traders and deepening institutional activity, India’s market opportunity is structural, not cyclical and certainly not dependent on any one firm,” Thakkar said. “When one player exits, others step in and often, very fast.”Many global trading giants are already expanding into India, setting up local entities, hiring talent, and investing in infrastructure amid expectations that large domestic consumer and investor bases will help shield India from global turmoil sparked by trade policies. “SEBI’s clampdown will bring sharper compliance and more robust governance thus, strengthening market integrity and raising the bar for all,” Thakkar said.Jane Street’s actions raise questionsStory continues below this adThough headquartered in the US, Jane Street Group operates across major global markets and is run by decision-makers located outside India.The case raises critical questions about how foreign financial institutions operate in Indian markets, and whether current safeguards are strong enough to prevent sophisticated forms of market manipulation. For now, Jane Street stands barred—its trades frozen, and its reputation under watch.Some market experts believe the regulator should have stepped in sooner, rather than waiting for the NSE to issue a caution. Whispers about Jane Street’s unchecked and aggressive trading strategies had been circulating in the market since early 2024.How derivatives work & and where Jane Street crossed the lineDerivatives are financial contracts that don’t have value of their own — they derive it from something else, like a stock or an index. The National Stock Exchange (NSE) has become the largest derivatives exchange in the world, thanks to the sheer volume of trades it handles daily.Story continues below this adIn a well-functioning market, the price of a stock or index future tends to stay closely aligned with the price of the actual stock or index it tracks. That’s because of arbitrage — a simple but powerful balancing force. If the future trades too high, savvy traders sell it, buy the cheaper stock in the cash market, and profit when both prices meet at expiry. If it trades too low, the process works in reverse.This built-in mechanism keeps prices stable and ensures the futures market doesn’t drift too far from reality.However, in the case of Jane Street, SEBI found this natural balance being deliberately distorted. Instead of allowing prices to move freely and correcting any gaps through market forces, Jane Street’s trades were designed to influence those very gaps. By executing large and aggressive orders, particularly near market close and around expiry days, they appeared to push futures prices in their favour, upsetting the delicate link between futures and the underlying assets.What is Jane Street Group?Headquartered in New York, Jane Street Group LLC is a global proprietary trading firm that began its journey in 2000, started by a small team of traders and technologists in a modest New York office. Over the years, it has grown into a financial powerhouse, with more than 3,000 employees, operating across five global offices, and trading a wide array of asset classes on over 200 trading venues in 45 countries.