Sebi examining Jane Street request for lifting restrictions

“Jane Street has further requested Sebi that, following the creation of this escrow account in compliance with Sebi directions, certain conditional restrictions imposed under the interim order be lifted and that Sebi issue appropriate directions in this regard,” Sebi said. This request is currently under examination by Sebi in accordance with the directions of the interim order, the regulator said in release on Monday.

“They (Jane Street) have further stated that this action has been undertaken by them without prejudice to their rights and remedies which remain available to them in law and equity,” Sebi said.

In its July 3 order, the markets regulator ordered the seizure of alleged Rs 4,843.57 crore ‘illegal gains’ Jane Street made through manipulative trading in Nifty futures. Sebi also barred the firm from participating in any securities trading until the amount is recovered.

Legal experts are of the opinion that since Jane Street has complied with Sebi’s order, they can seek certain relaxations.

“The July 3 order of Sebi was an interim one. By depositing Rs 4,843.57 crore, Jane Street has complied with that order. Now, they can always ask for a modification,” said a legal expert.

Sources said discussion between Sebi and Jane Street is in the preliminary stage. They believe that the regulator may consider certain requests made by Jane Street, which is a large player in the domestic derivatives market.

The impact of Jane Street’s absence from capital markets was witnessed on July 11, which was the first expiry day on the National Stock Exchange (NSE) after the group was barred from dealing in the market. The turnover in the NSE’s equity derivatives segment plunged by nearly 21 per cent on July 11, compared to the previous expiry on July 3.

The overall turnover in the bourse’s derivatives segment on Thursday stood at Rs 476.39 lakh crore, down 21.29 per cent, compared to Rs 605.23 lakh crore on July 3, a day ahead of the Sebi’s interim order against Jane Street was released.

The number of contracts traded on the NSE’s derivatives segment was down 21 per cent to 25.25 crore on July 10, compared to 31.92 crore on July 3, according to the NSE data.

The Wall Street firm is expected to challenge Sebi’s order by approaching the Securities Appellate Tribunal (SAT) in the coming days.

Jane Street, considered one of the most influential proprietary trading firms globally, recently strongly pushed back against the allegations. In a communication to its employees, the firm described Sebi’s accusations as “extremely inflammatory” and expressed deep disappointment with the regulator’s decision. The firm is apparently preparing a formal legal response.

Jane Street denied Sebi’s claim that it orchestrated “an intentional, well-planned, and sinister scheme” to manipulate Indian markets, particularly through trading in Nifty Index futures. The firm maintains that its actions on January 17, 2024 — one of the days highlighted in Sebi’s report — involved standard arbitrage trading, a common and legitimate strategy.

In an internal memo, Jane Street criticised Sebi for using metrics to assess market impact and trading aggressiveness that, according to the firm, don’t reflect actual market behaviour. The firm also rejected Sebi’s assertion that it ignored concerns raised by the National Stock Exchange (NSE). Instead, Jane Street claimed it voluntarily paused trading at the time to understand the exchange’s feedback and later revised its trading approach to align with NSE’s expectations.

“We believed we had reached a shared understanding and reflected it in the adjustments to our trading practices,” the memo stated. “Since February, we’ve made repeated efforts to engage with Sebi, but have been consistently turned away.”