‘It can’t be a one way street’: Sebi chief’s past caution gains relevance amid Jane Street probe

As Sebi intensifies its scrutiny of US-based proprietary trading firm Jane Street, an earlier warning by Sebi chairperson Tuhin Kanta Pandey has resurfaced, shedding light on the broader issues within India’s derivatives market.

Speaking at the Business Today MindRush 2025 event in March, Pandey had voiced serious concerns over the participation of retail investors in the futures and options (F&O) segment. Citing internal studies, he revealed that nearly 90 per cent of retail traders were incurring losses in F&O trading.

Highlighting the structural imbalance in the derivatives market, Pandey had said, “It cannot be a one-way street. It cannot be that only the very large organised players must always be making money and the retailers must always be losing money.” His remarks underscored the growing risks faced by retail participants, who often overestimate their trading capabilities in a space largely dominated by sophisticated institutional entities.

Calling for reforms, Pandey stressed the need for a more nuanced approach—one that promotes investor awareness and strengthens the broader market infrastructure. “We need to have a nuance. We have to have informed investors. We have to also have some systemic improvements,” he added.

Meanwhile, Sebi is expected to widen its probe to cover additional indices, as it investigates potential instances of market manipulation by Jane Street beyond the current scope.

The regulator has barred Jane Street from participating in Indian markets, citing alleged manipulation in the equity derivatives segment.

According to Sebi, the firm engaged in manipulating index levels on expiry days to generate substantial profits from index derivatives, particularly Nifty and Bank Nifty options. The alleged misconduct led to unlawful gains amounting to Rs 4,843.57 crore, which the regulator has ordered to be fully impounded and transferred to an escrow account.

Jane Street’s operations in India are conducted through three registered foreign portfolio investors (FPIs): Jane Street Asia Trading Ltd (JSATL), Jane Street India Trading Pvt Ltd (JSITPL) and Jane Street Asia LLC (JSALLC). Although legally distinct, Sebi’s investigation revealed that the entities acted in complete coordination — executing identical trades simultaneously. This trading pattern, Sebi noted, did not align with typical hedging or liquidity-providing strategies, but instead pointed toward deliberate market manipulation.