Jane Street hires Khaitan in index manipulation case
US high-frequency trader (HFT) Jane Street has hired top law firm Khaitan & Co. to defend itself in the case of alleged index manipulation, two people aware of the matter said.
The Securities and Exchange Board of India (Sebi) alleged in an Interim order last week that Jane Street had manipulated the Bank Nifty and Nifty indices over two years by taking outsized trading positions, relative to other market participants, in their cash and derivatives constituents.
According to the regulator, this enabled Jane Street to make unlawful profits of ₹4,844 crore from trades in weekly Bank Nifty and Nifty options.
“The HFT is very close to closing the loop and is expected to pay the amount as asked by Sebi,” said a senior executive aware of the development.
Khaitan & Co and Jane Street did not respond to Mint’s late night queries sent on Sunday.
“The two options before Jane Street are to challenge Sebi’s interim order or to respond to it,” said Sandeep Parekh, founder of Finsec Law Advisors. “A challenge would mean it goes before the Securities Appellate Tribunal (SAT), and from thereon to the Supreme Court, depending on which way the tribunal rules. A response means they pay the amount and continue to trade in the market, reserving a right to seek legal redress as the Sebi investigation is ongoing.”
Sebi flags expiry-day strategy in January
A key episode cited in the Sebi order occurred on 17 January 2024, the weekly expiry day for Bank Nifty options. The index opened 3.2% lower at 46,574 after HDFC Bank reported disappointing quarterly results. Sebi alleges Jane Street responded by purchasing Bank Nifty index futures and constituent stocks worth ₹4,370 crore, helping the index recover to a high of 47,212.75 and giving “an impression of recovery” in the index.
As the index recovered, call option prices surged while put options slumped. Sebi claims Jane Street proceeded to then sell the costlier call options to and buy the cheaper put options from other participants in this phase, taking total bearish exposure in Bank Nifty options worth ₹32,114.96 crore.
In the second leg, Jane Street allegedly unwound its positions, pushing down the index and its constituent stocks, which boosted the value of the purchased puts manifold while eroding the value of the sold calls, enabling them to rake in ₹735 crore in options that day as the Bank Nifty plunged 4.28% to close at 46,064.45.
Firm denies wrongdoing
Sebi alleges that through such strategies, Jane Street profited illegally to the tune of ₹4,844 crore over 21 days between August 2023 and May 2025. The regulator has ordered seizure of the alleged gains and barred Jane Street from the capital market until the money is deposited in an escrow account. Sebi also said Jane Street entities made a total profit of ₹36,502.12 crore between January 2023 and March 2025 through its trading strategies.
In an internal staff communication after the Sebi order, Jane Street said it was “deeply upsetting” to see the firm ” mischaracterised.” The note added, “We are working on a formal response to Sebi.”
Addressing the specific allegation regarding 17 January 2024, Jane Street said, “The strategy termed manipulation by Sebi was in fact a commonplace practice to align the large divergence in prices between the Bank Nifty index options and the price levels implied by its constituent stocks on that day.
Priyanka Gawande contributed to this report
