The Securities and Exchange Board of India (SEBI) is ramping up its surveillance of the derivatives trading space, following a high-profile crackdown on global trading firm Jane Street. SEBI Chairman Tuhin Kanta Pandey stated on Monday that the regulator is intensifying its oversight to prevent manipulation in India's booming derivatives market. He noted that while the Jane Street case is significant, such cases might not be widespread.
India currently holds the title of the world’s largest equity derivatives market, contributing nearly 60% of global equity derivatives contracts as of April, according to the Futures Industry Association. This growth has been driven by both institutional investors and an increasing number of retail participants.
In response to concerns about excessive speculation, SEBI has already reduced contract expiry options and increased lot sizes, making derivatives trading more expensive and limiting volatility. But the Jane Street case has exposed potential loopholes that may still allow major players to manipulate prices.
In a 105-page order, SEBI barred Jane Street from participating in Indian securities markets and ordered the seizure of ₹4,840 crore (around $567 million), calling it illegal profit from market manipulation. SEBI accused the firm of artificially inflating the Bank Nifty index by buying heavily in the cash and futures markets in the morning, while holding short positions in options. Later in the day, the firm allegedly reversed its trades, profiting from the drop in the index.
SEBI is now expanding its investigation to examine Jane Street's trades across multiple exchanges and potentially other indices, signalling a broader regulatory crackdown. This could result in stricter scrutiny of large trades, more frequent audits, and possibly new rules to safeguard retail investors and preserve market integrity.
While SEBI hasn’t named other firms under watch, experts believe this case may spark a wider review of trading practices across the derivatives segment.
