[Bhavin Patel is a Programme Director and Natasha Aggarwal a Senior Research Fellow at TrustBridge Rule of Law Foundation]
On 3 July 2025, the Securities and Exchange Board of India (“SEBI”) issued an ex-parte interim order against the Jane Street group. The order asserted that Jane Street employed manipulative strategies (intraday index manipulation and extended marking-the-close) on the NIFTY and BANKNIFTY indices. It directed the impounding of Jane Street’s allegedly unlawful gains through such actions amounting to approximately Rs. 4,843 crores, and restricted the group from accessing the securities market until the amount was impounded. Jane Street paid this amount into an escrow account on 14 July 2025 and resumed trading in the Indian securities market on 21 July 2025.
The ex-parte interim order finds that Jane Street, on a prima facie basis, violated section 12A of the Securities and Exchange Board of India Act, 1992 (the “SEBI Act”) and regulations 3, 4(1), 4(2)(a) and 4(2)(e) of the SEBI (Prohibition of Fraud and Unfair Trade Practices) Regulations, 2003 (the “FUTP Regulations”). Under these provisions, Jane Street is alleged to have: (1) dealt in a fraudulent manner, (2) using a fraudulent, manipulative or deceptive device, (3) engaged in manipulative, fraudulent or unfair trading practices, (4) knowingly indulged in an act that creates a false or misleading appearance of trading, and (5) manipulated or influenced prices. Jane Street has filed an appeal against this interim order, and the next date of hearing at the Securities Appellate Tribunal is 18 November 2025 (SAT order in Appeal 413/2025 dated 9 September 2025). Earlier news reports indicated that Jane Street may argue that its actions constituted legitimate arbitrage and not market manipulation.
This case will test the boundaries of SEBI’s legal framework, as the law itself does not distinguish between arbitrage and manipulation. Ostensibly, SEBI’s interim order appears to distinguish between legitimate arbitrage and market manipulation on the basis of intention – as explained below, the interim order cites a Supreme Court decision to define manipulation as a “deliberate attempt” to interfere with the market. Mudgal and Sud provide a descriptive overview of the allegations against Jane Street, and note that “intent” under the FUTP Regulations can be inferred from the impact of the action.
We ask what the applicable legal framework requires in terms of the alleged violator’s intention, what type of evidence SEBI may use to establish such intention, and the standard of proof applicable in such matters. We then analyse whether SEBI’s interim order satisfies these requirements and standards.
Applicable Legal Framework: Intention
SEBI’s legal framework on market manipulation is complex and, under it, the degree to which SEBI must prove intention appears to be in flux. This is evident from Table 1, which depicts the requirement to prove intention in the legal framework over time:
| Intention required | Intention not required | |
| FUTP Regulations, 1995 | 1 | |
| FUTP Regulations, 2003 | 1 | |
| Regulation 4(2)(a), FUTP Regulations, 2003 | 1 | |
| Supreme Court in SEBI v Kanaiyalal Baldev Patel ((2017) 15 SCC 1) | 1 | |
| Supreme Court’s concurring opinion in SEBI v Rakhi Trading ((2018) 13 SCC 753) | 1 |
The applicable definition of fraud in this case (regulation 2(1)(c) of the FUTP Regulations) includes within its ambit acts or omissions “whether deceitful or not” to induce another person to deal in securities. This definition is a marked departure from the 1995 version of the regulations, which specifically defined fraud as “acts committed with the intentto deceive” [emphasis added]. This shift indicates that intention is not necessary to constitute fraud under the current version of regulation 2(1)(c), and this was affirmed by the Supreme Court in SEBI v Kanaiyalal Baldev Patel (2017).
However, the FUTP Regulations require some degree of intention to prove a violation of regulation 4(2)(a) (creating a false or misleading appearance of trading). Regulation 4(2)(a) explicitly requires knowledge. Notably, the element of knowledge was added by way of an amendment in 2018 pursuant to recommendations from the Committee on Fair Market Conduct, to exclude inadvertent trades from its scope. The concurring opinion in SEBI v Rakhi Trading has interpreted this provision to involve “a deliberate attempt to interfere with the free and fair operation of the market” [emphasis added]. This extract was also quoted by SEBI in its interim order against Jane Street.
This means that there are two varying requirements as to intention in the applicable law: while Kanaiyalal Patel clarifies that there is no requirement of “intention” to constitute “fraud” under regulation 2(1)(c) of the FUTP Regulations, the concurring opinion in Rakhi Trading requires a deliberate attempt to manipulate the market for a violation of regulation 4(2)(a), implying some degree of intention has to be present. SEBI has cited a number of provisions of the FUTP Regulations in its allegations, so it can arguably rely upon the provisions which do not require an element of intention to put forward its case.
Evidence and Standard of Proof
The fact that intention does not need to be proved raises the question of how SEBI will distinguish between arbitrage and manipulation, the type of evidence that is required to do so, and the applicable standard of proof.
Direct evidence of market abuse or manipulation is rare and hard to find, and several cases have established that reliance can be placed on circumstantial evidence in such matters. For example, the Supreme Court stated in SEBI v Kishore R. Ajmera (2016):
It is a fundamental principle of law that proof of an allegation leveled against a person may be in the form of direct substantive evidence or, as in many cases, such proof may have to be inferred by a logical process of reasoning from the totality of the attending facts and circumstances surrounding the allegations/charges made and leveled…It is the judicial duty to take note of the immediate and proximate facts and circumstances surrounding the events on which the charges/allegations are founded and to reach what would appear to the Court to be a reasonable conclusion therefrom.
Shortly thereafter, the Supreme Court established in Chintalapati Srinivasa Raju v SEBI that “a reasonable expectation to be in the know of things can only be based on reasonable inferences drawn from foundational facts”. This means that there must be “immediate and proximate facts and circumstances” and “foundational facts” that lead to the reasonable conclusion of market manipulation. In the context of insider trading, the Supreme Court has noted in Balram Garg v SEBI that there must be some circumstantial evidence beyond trading patterns to establish the violation.
Here, it is helpful to note SEBI’s previous decision in a matter involving Reliance Industries Limited (RIL), and the evidence used in that matter to establish violations of the FUTP Regulations. In 2021, an order by a SEBI adjudicating officer (AO) imposed sanctions on RIL and related entities for exceeding position limits and depressing stock prices through a manipulative scheme disguised as hedging. The AO relied on a Gujarat High Court decision to distinguish speculative trading from hedging, stating that the former is aimed at “reaping huge speculative profits”. The AO examined the trading patterns (timing, pricing, profits) and relied on three additional factors to conclude that the violators’ actions constituted speculative trading and not hedging: (1) the violators used 12 agents to exceed position limits, (2) the F&O positions were disproportionate to actual hedging needs, and (3) RIL did not have a formal policy of hedging. This precedent is demonstrative of the type of evidence that is necessary to distinguish between a genuine trading strategy and market manipulation.
In its interim order, SEBI has relied primarily on Jane Street’s trading strategies to make a case for market manipulation. It has presented a “minute-level analysis” of Jane Street’s trading patterns (timing, volume, repetitive nature). The interim order also finds that there is “no economic rationale” for Jane Street’s trades in the constituent stocks and futures, other than to manipulate the market, and concludes that “the immediate and proximate facts and circumstances, thus, lead to a logical and necessary inference that the large and aggressive trades were not executed in a vacuum or for ordinary hedging or arbitrage operations”. This might suggest that the standard set in the Reliance Industries case has been satisfied.
Conclusion
SEBI’s interim order in the Jane Street matter is well-written, well-structured, and presents minute analyses of Jane Street’s trading activities. It is important to note that the order under analysis is only an interim order, and that the final order in the matter would have to respond to any factors that Jane Street puts up in its defence. Although the final order in the matter may provide additional factors (including in response to Jane Street’s defence), as required by the Supreme Court decisions discussed above, for why SEBI thinks Jane Street has violated the FUTP Regulations, the inconsistency in required standards across regulations and Supreme Court decisions is troubling. The Jane Street case has highlighted the shifting definitions of fraud and the concomitant requirement of intention employed in Indian securities laws, and underscored the need for a robust regime relating to the standard of proof applicable and the type of evidence permitted to prove a case in such matters.
Basic rule of law principles require that market participants are able to plan their activities, knowing what the resultant consequences under applicable law might be. If the applicable legal standards are fluid, such as those relating to the requirement of intention under the FUTP Regulations, and if circumstantial evidence is all that is required to establish a violation, then market participants do not have this predictability. The interim order states that “a large number of participants are likely to have been induced to deal in index options at artificial prices”, and notes that over 90% of individual F&O traders incurred losses from between financial years 2022 and 2024. While this may be enough to satisfy the applicable legal requirements, it provides no clarity on the difference between arbitrage and manipulation, and does not provide any clarity to market participants on where the boundary between legitimate and illegitimate actions lies.
– Bhavin Patel & Natasha Aggarwal