SEBI’s extended inquiry against Jane Street reveals additional suspicious trading patterns
The firm’s troubles seem to increase, as the Central Board of Direct Taxes builds a case against it for misusing India’s tax treaty
Even as the Securities and Exchange Board of India (SEBI) investigates US-based trading firm Jane Street, the new detections point to a larger scale of alleged market manipulation.
After the market regulator’s July interim order, investigators expanded their probe beyond Nifty Bank, covering more strategies and indices. The analysis revealed additional suspicious trading patterns.
Earlier, Jane Street cited the National Stock Exchange (NSE) report, which gave the trading firm a “clean chit.’ In its appeal before the Securities and Appellate Tribunal (SAT), it stated focusing on trades in a handful of stocks.
The global firm’s trading patterns first raised red flags during a detailed review, which led to the market regulator’s interim order in July. SEBI had concerns about abnormal bouts of volatility around weekly index option expiries. It pointed out that certain entities consistently carried the largest exposures in cash-equivalent futures and options (F&O), particularly on expiry days.
While the initial focus was on the Bank Nifty index, given its sheer trading volumes, the investigation widened to include the Sensex and other indices.
In its appeal before SAT, Jane Street demanded the correspondence between SEBI and NSE, and the regulator’s prior surveillance report, insisting the documents’ importance for its defence.
However, SEBI argued, “The investigation is at a critical juncture. We cannot provide every single document. Much of what is being sought is confidential, irrelevant or premature.”
Jane Street’s temporary trading ban was lifted after the firm deposited Rs.4,844 crore, classified by SEBI as profits derived from manipulative practices.
Meanwhile, Jane Street’s troubles seem to be adding up, as the Central Board of Direct Taxes (CBDT) is building a case against it for misusing India’s tax treaty.