Jane Street barred from Indian markets as regulator freezes $566 million

If you look at my history (I'm not going to spam HN with another link) there is a repository that includes option volatility visualizations. I have some data visualizations that might help detect this behavior, one that shows the volatility surface skew and another which shows normal distribution of premium purchased at strike prices over different expiration dates. I haven't found any trading strategies that are effective using the data but there might be something there.

Don't know about Jane Street, but that sounds like a general problem.

If options & futures are more liquid than the underlying, someone will be tempted to nudge the underlying.

Bond ETFs and their options chains seem like another locale where this could happen.

    > If options & futures are more liquid than the underlying, someone will be tempted to nudge the underlying.

    > Coined in 2023, the group consists of Alphabet, Amazon, Apple, Meta Platforms, Microsoft, Nvidia, and Tesla.

Ok, but what moron was selling them the puts , and not seeing the pattern after a couple of days of this ? Sebi logic seems questionable.

    > what moron

I never quite understood why market manipulation is illegal. If market participants make emotional or irrational decisions detached from fundamentals, it should be on them.

So why can’t other players detect this behavior and trade with JS, removing their edge?

Maybe, but given the reputation of Indian regulators I’m skeptical Jane Street’s only sin was the alleged market manipulation.

People may recall the matter involving Adani Group. https://hindenburgresearch.com/adani-update-sebi/

    > Seems presumptive to slander an entire nations regulatory group on a single/couple of examples.

    > However, given the scale of the operation, Jane Street's actions sure look like textbook market manipulation. Calling it like I see it.

I am unsure that the US SEC would agree with you. Buying and selling "a lot" is not clearly market manipulation in the US.

Finally, in my view the India SEBI rules are insanely vague and are written to grant a lot of leeway to the regulator.

The real problem that no one is talking about: Why is India allowing its derivatives markets to explode? An estimated NINETY percent of retail derivs "investors" (I prefer the term "gamblers") lose money in India. Lots of these loses are gains for foreign banks and hedge funds. India: What the hell are you doing!?

I’m not sure you are seeing it clearly..or have any trading experience whatsoever. They took substantial risk. There is always someone bigger so if they were wrong they could have been buried. Then they reversed. If there are allegations of insider trading or collusion or something else then I’m ready to pile on but I don’t see anything here.

Jane Street called the bluff of that market. Occams razor.

Hardly a sophisticated high tech HFT operation. Totally illegal of course, except in places that maybe don't have the regulatory rigeur.

Unsurprising that unethical but "righteous" crooks like SBF and his pals came out of that place.

I imagine Jane Street will also justify this with some EA bullshit, or like Soros during the 97 crisis just say "someone would do it ; may as well me".

I'm amazed they managed to move firms. Suppose you know how the strategy works, and it's like what SEBI says.

1) How do you approach mlp? They don't just give you an account, they have risk officers, compliance officers, and general strategy due diligence.

2) If you manage to get past it, what then? Say mlp just asks some superficial questions and sees the dollar signs. Are you going to do the same thing? You have to think the compliance people will complain, surely?

3) So maybe the strategy they actually approached with was a parasitical strategy? If you know which stocks will be bought and sold by JS, maybe you do jump in first? Especially as you'll know particulars like when it happens, which stocks are selected, and how to spot them.

This is interesting. Anyone know what they offered these traders? Can't be more than Zucks 100mn offer!

As always in finance the secret ingredient is crime.

I wonder to what degree the lawsuit is what got this on the radar of the Indian authorities. Maybe they should have listened to Stringer Bell.

SEBI’s bold move, at the expense of appearing unfriendly to foreign institutions, is commendable. I really hope that the SEC will wake up from its slumber and start investigating the tactics used by Citadel and its kind.

    > HFT style manipulation skimming money from everyone else in our markets

That's sort of the very definition of arbitrage in today's modern markets - its not just the text book definition of "borrow money at a low interest rate and invest at a higher interest rate": there's latency arbs, regulatory arbs, microstructure arbs... They belong to the firms who can research and benefit from them before others figure it out.

I hear this defence of NYSE specialists now and again. Why do other markets, including the NASDAQ, not require them? It makes little sense to me in 2025 where the vast majority of trading is electronic.

Who makes the markets in India? Is it the big Indian banks, or do these multinational trading firms act as market makers? If so, how do they distinguish between their trading and market making activities? It seems like it'd be relatively easy to rig a market (control the price) with enough capital and management over the trading.

>but many large-scale HFTs today operate in ways that either stretch the legal boundaries or exploit regulatory gaps. Many practices arguably amount to market manipulation in spirit, even if technically legal.

Can you expand on this?

>the regulators are either too lazy, stupid, ill equipped or uninterested to do anything about it.

Or it's their friends doing it and they're not uninterested, they're very interested in ensuring it continues.

Does it really matter? I've done nothing but buy and hold at reasonable prices, and market manipulation has never affected my trades. This seems like finance bros fucking finance bros, which is solidly in the "who cares" category of my life.

    > on such a simple scheme

Tower got caught doing the same thing about 10 years ago. Apparently the strategy was literally called "the hammer" or something that was far too on-the-nose, but it was exploiting other strategies at the firm that bought a ton in the morning and hammered the close - "the hammer" made that leg profitable.

I assume Jane Street's version of this may have been unintentional: get your big position to do a bunch of intraday trading without worrying about being too short, then exit at the end of the day. This can work because markets tend to go up or stay flat intraday, meaning you get to use typical strategies in a jurisdiction that doesn't like when you go short via superposition. Then along the way, someone figured out this options trade and didn't realize their own behavior was influencing the price of the option (oops, I guess it wasn't superposition all along).

They probably run every sort of strategy available in various markets. The indian one they probably played a much riskier hand thinking they could get away with it.

There were fools in size in that market, and they got fleeced. What were they doing ? If anything, JS was teaching them a lesson - and now, with this action, they will be bolder in their foolishness, and someone else will separate them from their money. Index options markets are not for the unsophisticated to play in except as a casino.

"market manipulation" in general is hard to define. The working definition in the US is something along the lines of "placing orders in the hopes that the price of the security will change in response to those orders existing, with no intention of actually executing the orders". There may be some specific regulations about specific types of market manipulation that are more clearly defined, but oftentimes not. There's lots of grey area, because the definition of market manipulation makes it seem like any order that's canceled instead of executed might be market manipulation. But in fact a majority of orders do get canceled before they trade!

So the real difference between market manipulation and a canceled order is just intention, so regulators have to make judgment calls sometimes.

In finance, regulation has two major flavours: prescriptive (specific) and "in spirit" (broad). US is mostly prescriptive, but the Howey test is a good example of "in spirit". Singapore is basically the inverse. Both can work well.

Honestly, there's a good case to be made that it doesn't matter. A government has every right to say "don't manipulate our market and try to fuck our economy" and not need to specify every tiny little loophole, especially to foreign companies. The fact that they must be reactive means they are always behind, and guarantees their country will be screwed and untold damage done before the problem can be addressed.

There is absolutely zero illusion that Jane Street is acting in good faith. They know what they're doing is wrong.

After all the manipulation, all the crashes, all the exploitation - maybe it is appropriate to just say "I don't care if we wrote it down, we've had enough of this shit".

    > A government has every right to say "don't manipulate our market and try to fuck our economy"

> The alternative claim - that large traders do not make decisions based on how their activity will move the market, is of course absurd.

No, that's de riugeur for any large firm. You or I can buy a stock without changing the market, but if a bank or hedge fund wants to buy or sell millions of dollars of a stock they very much have to worry about execution. The price they receive for a trade will be worse than the market price, simply because the price will move once it's clear that someone is making a large block trade.

This is also why hedge funds worry about their 'alpha'. Even when they have found a good basis for a trade (e.g. an as-yet unexploited correlation), taking a position to profit on that trade moves prices in ways that eliminate that edge. That's the efficient market hypothesis in action.

The very odd thing here is the allegation that Jane Street could make perfectly ordinary market transactions in liquid securities and somehow have the market move with their net position. This is extremely unusual.

Not really.

In this case it was Millenium ratting out on Jane Street (edit - other way around), but now the entire HFT (Edit: hedge funds. Thanks for the callout avvt4avaw) industry is under extreme scrutiny by SEBI as a result [0]

[0] - https://www.sebi.gov.in/enforcement/orders/jul-2025/interim-...

As a start, separate "derivatives" (a huge category of products) into two simpler categories: listed options and futures. For many underlyings, like interest rates or commodities, it is very difficult to trade the underlying directly, so you use derivs to trade them indirectly.

Related: My biggest concern: There should be more gatekeeping around allowing retail traders access to derivs markets due to the implied leverage in the contracts. That said I don't know a good way to gatekeep. How about an exam?

I can think of a few off the top of my head.

It's a source of easy leverage. Buying calls to make the underlying's price go up is easier than buying the underlying. Now you might ask a follow-up question: why is leverage beneficial in the first place.

It's also an easy way to get a loan that's almost at the risk-free rate (i.e. far better than banks) just by doing a box spread.

It's also a valuable measure of volatility by calculating the implied volatility. It could be for an individual stock or the market as a whole (VIX).

Puts let you hedge long positions, calls let you hedge short positions. Without that you'd have to liquidate much sooner so there would be more volatility.

More abstractly derivatives let traders in one asset pay premia to offload risk to other traders who are more able to absorb it. This way everyone has what they want and the market functions more efficiently. It's very similar to insurance (and you can actually model insurance like a portfolio of long/short put+call options with a probabilistic (event dependent) multiplier.)

They allow for more flexible risk management (ie hedging), especially when dealing with margins or not very liquid tickers because they give you exposure to 100 units (%δ * 100) without requiring you to buy or sell them.

If you own stock, you can sell calls against it — especially if premium is high to hedge against drops. If you are short stock, you can buy calls to hedge against short term movement.

I personally don’t think they improve price discovery because market microstructure through options and mm exposure affect pricing.

Selling naked puts doesn’t seem particularly outrageous. About half the time that I want to buy a position, I’ll sell a series of put options just OoM until I get assigned the shares I want, collecting small premium along the way.

My “hedge” in this case is that I want to own the shares. (I’m short vs where I want to be.)

NIT: It's _marking_ the close. "Painting" has a different meaning.

My understanding is that it is the closest to legal gambling available in India and so the local market for gambling type behavior inflates the Indian options volume.

Take the example of spoofing. A trader puts in a 10mm order on the bid in futures, and then pulls it once price gets near him. He then develops an automated trading strategy that capitalizes on the volatility spike in the options market when this bid hits the tape.

This example has two common characteristics of market manipulation - using size to push markets in a direction for personal benefit, and putting the bid in with sole intent to push the market, as in there was never any desire to see the order actually get filled.

If Jane Street was selling options that were only profitable within the context of a strategy that involved pushing massive size into the market near market close and forcing price down, that is likely categorized as manipulation. On the other hand, if they were moving inventory and in the process moved price, and they tweak their trading strategies to further profit from this, that's a more arguable position.

> What is „market manipulation“ actually vs non-manipulative buying and selling to make a profit?

directly proportional to the distance from the courts/judges/regulators

market manipulation is when you place/cancel an order with the intention that the market will react to you in a specific way, with no intention of that order actually executing.

SEBI is prosecuting Adani now [0] (edit: correct link [1] - they are going after Adani Group's holding funds in Marutius). The previous chairperson of SEBI was unceremoniously canned this March for this incident and the Adani incident, and the current chairperson (Tuhin Kanta Pandey) cleaned up Indian SoEs during their privatization during Modi 2.

Edit: cannot reply below

Indian regulators won't settle with Adani Group. They have become a political liability due to how slapshot they played AND because the Bihar Elections are coming up, so skinning some goats (balli ka bakra) is a quick win - the RJD, INC, and TMC attacks on Modi+Adani are landing in Bihar and much of the rest of India.

Every Indian government does this - such as Kingfisher Group, Sahara Group, Gitanjali Group, etc.

Treat it the same way as Truong My Lan's case in Vietnam and Wanda Group's case in China.

[0] - https://www.reuters.com/sustainability/boards-policy-regulat...

[1] - https://www.reuters.com/sustainability/boards-policy-regulat...