Sebi to upgrade surveillance against derivatives manipulation: Chairman

Securities and Exchange Board of India (Sebi) Chairman Tuhin Kanta Pandey on Monday said that the markets regulator is upgrading its surveillance to examine cases of derivatives manipulation. His remark comes days after Sebi found New York-based hedge fund Jane Street was manipulating stock indexes.

"There may not be many more such cases," said Pandey, as quoted by news agency Reuters.

On July 3, Sebi issued an order barring Jane Street and its group entities from accessing India’s capital markets. The regulator also directed the seizure of ₹4,844 crore in alleged “unlawful gains” made by the firm—marking the largest impounding in Sebi’s history.

On July 5, Pandey warned that market manipulations, such as those allegedly committed by Jane Street, will not be tolerated.

What is Jane Street?

Jane Street, a global trading firm with over 3,000 employees across offices in the US, Europe, and Asia, trades equities in more than 45 countries. According to Sebi, between January 2023 and March 2025, four Jane Street-related entities earned a combined profit of $5 billion through equity options trading in India.

The market watchdog stated that Jane Street took large positions in banking stocks and futures to create artificial upward pressure on the Nifty Bank index. Once the index rose, retail investors followed suit, at which point Jane Street reportedly offloaded its holdings, causing sharp market corrections.

Sebi's regulatory response

Sebi’s investigation forms part of its broader crackdown on market practices that harm individual investors—particularly retail participants in the booming derivatives segment.

The probe began in April 2024 after media reports alleged unauthorised use of high-frequency proprietary trading strategies. Sebi directed the National Stock Exchange (NSE) to examine the firm’s trades. In February, the NSE issued a cautionary letter to Jane Street advising it to stop using a specific trading strategy. The firm, however, continued its activities, prompting further regulatory action.

The rise in derivatives trading, which has also been driven by retail investors, has prompted the market regulator to limit the number of contract expiries and increase lot sizes to make such trades more expensive. According to the Futures Industry Association, India is the largest derivatives market worldwide, representing almost 60 per cent of the 7.3 billion equity derivatives traded globally in April.