Indian investment firm Jane Street finds loopholes in Foreign Portfolio Investor (FPI) regulations, amassing $4.3 billion in profits
In a significant development, the Securities and Exchange Board of India (SEBI) has taken action against US trading group Jane Street, barring four of its subsidiaries from the Indian securities market and impounding more than Rs 4,843 crore of gains from suspicious trades.
According to SEBI's investigation, Jane Street used two local entities in India to circumvent foreign portfolio investment (FPI) regulations and execute a manipulative trading strategy. The group routed certain trades through its Indian arm, JSI Investments Private Ltd, to create a façade of compliance, effectively circumventing restrictions on foreign investors and avoiding direct violation of rules.
In reality, Jane Street's real trading activity and manipulative strategies took place in the futures and options (F&O) segment. The Indian entity's intentional losing trades made it appear as though Jane Street was following a caution notice issued by the National Stock Exchange, but the manipulative trades were simply shifted to derivatives.
SEBI Whole-time member Ananth Narayan noted that the incorporation of JSI Investments Private Limited in India allowed Jane Street to work around regulatory prohibitions. The strategy employed by Jane Street involved moving the index in a desired direction to profit from the options they held.
The group made profits of approximately Rs 36,502 crore from January 1, 2023, to March 31, 2025. However, they incurred losses in the stock futures, index futures, and trading in the cash equities segment, totaling Rs 7,208 crore, Rs 191 crore, and Rs 288 crore respectively. Despite these losses, their manipulative activities in the derivatives market, particularly in the BANKNIFTY index, yielded profits of Rs 43,289.33 crore in index and stock options.
The strategy employed by Jane Street enabled them to execute the manipulative scheme without specifically flouting the FPI Regulations. The group bought cheap put options, building a large bearish position of Rs 32,114.96 crore in the BANKNIFTY index. This buying activity pushed up the BANKNIFTY index, making put options cheaper and call options expensive.
The two Indian entities undertook intraday trades that resulted in market movements and helped Jane Street's foreign portfolio investors (FPIs) make massive profits. On January 17, 2024, Jane Street bought BANKNIFTY constituents for Rs 4,370 crore in both the cash and future markets. This drop in the index price made their put positions highly profitable.
SEBI's interim order was written by whole-time member Ananth Narayan, who stated that the strategy employed by Jane Street was a clear case of market manipulation executed through this complex structure involving the two local Indian entities. The regulator has ordered Jane Street and its affiliate entities to return Rs 4,843 crore of alleged unlawful profits.
The SEBI's investigation is ongoing, and further orders have been issued. The US trading group is banned from the Indian securities market, and its assets have been frozen. This case serves as a reminder of the importance of adhering to regulatory guidelines and the consequences of market manipulation.
Jane Street's manipulative trading strategy, as discovered by SEBI, was executed in the Indian securities market, particularly in the futures and options segment, despite using local entities to circumvent foreign portfolio investment regulations. The group invested significantly in the finance sector, with profits of approximately Rs 36,502 crore from January 1, 2023, to March 31, 2025, primarily from their activities in the derivatives market, including investing in the BANKNIFTY index.
%20regulations%2C%20amassing%20%244.3%20billion%20in%20profits){kind=link}