The Securities and Exchange Board of India’s (Sebi) decision to ban Jane Street from trading in the Indian equity and derivatives markets marks a significant regulatory moment with far-reaching implications.
At the core, Jane Street’s role as a high-frequency trading (HFT) and market-making powerhouse meant it contributed substantially to liquidity, especially in actively traded instruments like Nifty and Bank Nifty options. Its sudden exit is already being felt — derivatives volumes fell by 13–17% in June, and with Jane Street out, that trend may worsen. Wider bid-ask spreads could make trading costlier, potentially discouraging both retail and institutional activity.
Brokerages and exchanges are among the first to feel the heat. Shares of Angel One, Nuvama Wealth, and BSE have already dropped 6–9%, driven by fears of declining revenues from reduced trading volumes. These firms depend heavily on the churn generated by derivative trades, particularly from proprietary and high-frequency strategies.
A deeper concern lies in the signal this sends to other global HFT and proprietary trading firms. Though no major firm has announced plans to exit, Sebi’s crackdown may prompt others to pause, re-evaluate their compliance frameworks, or slow expansion plans. India, despite being the world’s largest derivatives market by contract volume, might now seem riskier for firms relying on complex algorithmic strategies.
However, Angel One's chairman Dinesh Thakkar puts this in perspective. He highlights long-term positives — robust retail participation, demographic strength, macroeconomic stability, and the influx of global players like Citadel Securities and Jump Trading — to argue that India’s capital markets are fundamentally sound and still attractive. His remarks suggest that one firm's ouster could open the door for others more aligned with regulatory expectations.
For retail traders, the development could be a double-edged sword. On one hand, reduced liquidity may lead to less efficient markets. But on the other, the removal of aggressive HFT strategies could level the playing field. Given that retail losses in F&O trading surpassed ₹1 lakh crore in FY25, Sebi’s move could be seen as a protective measure — potentially ushering in more transparency, fairer pricing, and tighter regulation of predatory strategies.
Ultimately, Sebi has drawn a line in the sand — signalling that no player, however global or sophisticated, is above scrutiny. The fallout may cause temporary turbulence, but it could also lead to a healthier, more balanced market over time.
