Jane Street’s Scam: How Market Tricks Burned Small Traders
Jane Street and SEBI! (Images company websites)
Jane Street’s Wild Ride-How a Trading Titan Turned India’s Stock Market into a Rollercoaster—and Got Busted!
By P. SESH KUMAR
NEW DELHI, July 5, 2025 – Buckle up, folks! This is the juicy tale of Jane Street, a US high-frequency trading (HFT) giant, which allegedly raked in a staggering ₹36,500 crores from India’s stock market in just two years—₹4,800 crores of it through some slick (and shady) manipulation tricks.
Using lightning-fast algorithms and a “buy high, sell low, profit big” strategy, they turned the Indian market, especially the BANKNIFTY index, into their personal cash machine. But SEBI, India’s market watchdog, wasn’t having it—slamming a ban and seizing ₹4,843 crores in “unlawful gains.”
This rollercoaster saga exposes the dark side of HFT, the genius (and greed) behind it, and the lessons for regulators, traders, and the market itself. Ready for the ride? Let’s dive in!
Imagine a Wall Street wizard with 2,600-plus employees, armed with supercomputers that trade faster than you can say “profit”—that’s Jane Street, born in 2000 in the USA and ruling global markets with high-frequency trading magic. They execute millions of trades in milliseconds, and in India, they rolled in with four entities—two foreign, two domestic—zeroing in on the booming stock market, especially the BANKNIFTY index, a favourite playground for options traders.
From January 2023 to March 2025, they allegedly pocketed a mind-blowing ₹36,502 crores, and here’s the wild twist: they lost ₹7,496 crores in stocks and futures but raked in a whopping ₹43,289 crores from options.
How did they pull this off? It was a game so clever it teetered on the edge of cheating, turning the market into their high-stakes poker table where the chips were cash and the deck was rigged!
Picture this wild scene
Jane Street treated the market like a tomato farm ready for harvest. In the morning, they’d buy tons of BANKNIFTY stocks, artificially jacking up the index like a farmer hoarding crops to spike prices. While everyone panicked about the rising costs, they slyly sold expensive call options—bets the price would keep climbing—and snapped up cheap put options, wagering the index would crash later. Then, in the afternoon, they’d dump all those stocks, crashing the index and watching their puts explode in value while the calls they sold fizzled out like yesterday’s news.
Take a real-life spin from January 17, 2024: they bought ₹4,370 crores worth of BANKNIFTY stocks by 11:47 AM, built a massive ₹32,115 crores bearish options position—seven times their stock bet!—and then unloaded ₹5,372 crores by 3:30 PM. The result? A ₹61 crore loss in stocks transformed into a ₹734 crore options win, netting them a cool ₹673 crores in one single day—mind officially blown!
Their second trick, dubbed “Marking the Close,” was like rigging the scoreboard in the final minute of a match—they’d lay low all day, stacking up options positions, then unleash a ₹2,800 crore dump in the last hour, like on July 10, 2024, to swing the index and cash in big time. With 35-40% control of some stock volumes, they flexed some serious market muscle!
But this wasn’t just smart trading—it was manipulation with a capital “M,” and SEBI wasn’t about to let it slide. They branded it “egregious,” accusing Jane Street of cooking up a “false appearance of market activity” to fleece the little guys. With 16.15 lakh retail traders dabbling in BANKNIFTY options and only 4,675 trading the actual stocks, the odds were stacked against the underdogs.
When Jane Street bought big, you might’ve thought it was a bull run and jumped in with both feet, only to lose your shirt when they dumped, while they sped off to the bank laughing. The timeline reads like a thriller: the scheme got exposed in April 2024, the NSE threw a warning in February 2025, but Jane Street doubled down in May, and by July 2025, SEBI dropped the hammer with a ban from Indian markets, a ₹4,843 crore freeze, locked accounts, and a three-month exit order. Arrogance finally crashed into a brick wall!
SEBI’s bold move was a wake-up call that shook the track, though it’s not all smooth sailing. Banning Jane Street might spook other HFT firms, which drive 50% of options volume, and if they pull back, retail trading—clocking 35% of volume—could take a nosedive, hurting exchanges and brokers. The market might even see volatility spikes without these liquidity providers, adding some turbulence to the ride.
On the flip side, this action screams a message loud and clear: India’s market isn’t a playground for global giants to trample over. That 105-page SEBI order and the ₹4,843 crore seizure prove they mean business, and it validates what retail traders always suspected—those weird candles and expiry-day losses weren’t just paranoia, they were real.
Moving forward, SEBI needs to upgrade its tech to match HFT speed with real-time monitoring, educate retail traders about expiry-day traps, strike a balance by allowing legit HFT while cracking down on manipulation, and team up with US regulators to dodge regulatory arbitrage—keeping the race fair for all.
The line between manipulation and acceptable trading
Manipulation is like cheating at cards, cooking up fake demand by buying tons to pump prices or flooding supply by dumping to crash them, all to profit from rigged bets that leave others in the dust. Jane Street’s “tomato dump” and “marking the close” stunts crossed that line, exploiting retail ignorance for their gain. Acceptable trading, though, is like playing fair—using speed and algorithms to provide liquidity through market-making, narrowing bid-ask spreads, and cutting costs, which can stabilize markets when it’s not about tricking anyone. The key? Transparency—if the strategies are out in the open and don’t harm the market, they’re fair game to keep the game rolling.
Zooming out to the big picture, the pitfalls are glaring: retail traders got burned trusting those manipulated moves, the market’s integrity took a beating, and SEBI’s ban might trigger a short-term volume drop that shakes things up. Plus, if other firms are pulling similar stunts—and the “tip of the iceberg” question looms large—the problem might run deeper than just one rogue player.
But the perks? SEBI’s action pumps confidence into India’s market as a regulated space, forces HFT firms to play clean, and that ₹4,843 crore clawback could fund some serious investor protection. For traders, it’s a hard-earned lesson: diversify your bets, steer clear of expiry-day gambles, and don’t chase those sudden spikes like they’re the next big trend.
This saga isn’t the finish line—it’s the starting pistol for a new race. SEBI has to keep the pressure on with stricter rules, real-time audits to catch the cheaters early, and trader education to level the playing field. Jane Street can appeal all they want, but the message is crystal clear: manipulate, and you’re out of the game.
For us, the takeaway is straightforward—learn the ropes, spot the traps, and don’t wager your lunch money on a table that’s been rigged. The Indian market can be a goldmine packed with potential, but only if we keep those cheaters in check and let the fair players shine!
So, how did Jane Street pull off this high-stakes heist, and what was SEBI doing while this turbo-charged chaos unfolded? Let’s peel back the layers!
The market watchdog, based in Mumbai, wasn’t asleep, but it was more like they were stuck in traffic. The probe kicked off around 2022, triggered by market whispers and data anomalies, with media exposés hitting in April 2024 flagging “secret strategies.” The National Stock Exchange (NSE) sounded the alarm in February 2025, warning Jane Street to cool it, but the firm doubled down in May 2025, showing some serious racing arrogance.
SEBI’s team—around 700 staff—dug into three years of trading patterns, piecing together the manipulation puzzle with a 105-page order by July 3, 2025. They were gathering evidence, coordinating with exchanges, and building a case, but the slow grind meant Jane Street had a long runway to profit.
Why did it take so long for SEBI to drop the hammer?
It’s like they were tuning an old engine while Jane Street sped by in a rocket. First, SEBI’s resources are stretched thin—700 staff versus the SEC’s 4,500—making it tough to monitor a market with 60% of global equity derivative volumes in real time. Their tech lagged behind HFT speed, relying on post-trade analysis rather than catching the race live.
Second, the complexity of proving manipulation across millions of trades took time, especially with Jane Street’s sophisticated algorithms hiding the trail.
Third, regulatory caution played a role—SEBI wanted a watertight case to avoid legal blowback, delaying the ban until July 2025 after NSE’s warnings and a May relapse. It was a marathon, not a sprint, and Jane Street exploited every lap!
(This is an opinion piece, and views expressed are those of the author only)
Follow The Raisina Hills on WhatsApp, Instagram, YouTube, Facebook, and LinkedIn
About The Author
