Jane Street’s path back to trading in India isn’t easy
The quantitative trading firm has fulfilled the primary condition outlined in paragraph 62.1 of the Securities and Exchange Board of India’s (Sebi’s) interim order, directing it to deposit “unlawful gains” from alleged index manipulation in an escrow account with a lien marked in Sebi’s favour.
“As per the order’s own terms, specifically clause 62.11, this action should pave the way for the temporary ban on their market access to be lifted,” said Abhiraj Arora, partner at Saraf & Partners. However, he cautioned, “The investigation is still ongoing, and Sebi has put specific, forward-looking restrictions in place.”
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Jane Street will continue to contest the regulator’s order, according to a person familiar with the matter.
Jane Street and Sebi did not respond to Mint’s emailed queries till press time.
Clause 62.11 explicitly states that the directions stipulated in the interim order under paragraphs 62.2 to 62.10, which include the ban on trading, shall “cease to apply upon compliance with directions in clause 62.1″. This means that once the escrow deposit is verified, the trading ban imposed restraining Jane Street Group from accessing the securities market should automatically be lifted.
“Typically, the exchanges make a press release informing about the compliance of the Sebi directions with regard to the deposit of unlawful gains, and subsequently, the ban is lifted,” said Akshaya Bhansali, partner at Mindspright Legal. “The whole process is completed in a day so that the entity does not suffer from its continuing ban post-compliance.”
Citing the interim order, Asish Philip, partner at LKS law firm, “on payment of deposit, all other restrictions will be waived”. Jane Street “requested for relaxation of conditions and Sebi is examining the same”, he said.
However, Rohit Jain, managing partner at Singhania & Co., said, “Lifting of the trading restrictions was automatic but not instantaneous. Sebi must first verify and confirm the compliance.”
The regulator certifies this compliance and communicates it to stock exchanges and intermediaries, who then restore market access for Jane Street, according to Jain. “There is no fixed timeline prescribed, but this process typically takes a few days to weeks, depending on administrative and verification procedures.”
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Moreover, according to Jain, the deposit only serves as a safeguard so the suspected funds don’t leave the Indian jurisdiction or get dissipated while the investigation continues.
Scrutiny persists
The quant firm will continue to be under scrutiny. The Sebi order includes clause 62.13, which directs stock exchanges to monitor future dealings and positions of JS Group on an ongoing basis to ensure that these entities do not directly or indirectly indulge in manipulative activity.
Such directions “are one of a kind and not a general practice by Sebi”, calling it a departure from standard regulatory protocol, according to Bhansali.
Arora said the specific instruction to the stock exchanges to “closely monitor” Jane Street is a “heightened supervisory measure. This isn’t just business-as-usual monitoring; it’s a clear signal that the regulator remains deeply concerned and has put the entity on a short leash.”
Since it was an interim measure and not a final verdict, the order preserves Sebi’s right to continue its investigation and take further action, he said.
Special treatment
Bhansali said Sebi appears to be giving special treatment to the matter. Trading restrictions and de-freezing of the bank accounts, in compliance with Sebi’s own interim order, would have been listed automatically once Jane Street complied with the deposit of the “unlawful gain”, she said.
“However, the Sebi press release states that the request of Jane Street to lift the restrictions is under examination. This is not in line with the direction in the ex-parte ad-interim order,” Bhansali said. “Any delay in lifting the restrictions by Sebi will give an upper hand to Jane Street and will make it difficult for Sebi to answer before the Securities Appellate Tribunal.”
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