Kabhi kabhi kuch jeetne ke liye kuch haarna bhi padta hai.
Aur haar kar jeetne wale ko baazigar kehte hain! That isnt just Shah Rukh Khans never-ceasing discussion from the Bollywood thriller Baazigar, however also American hedge firm Jane Streets trick to generate income in the Indian stock market.After a year-long investigation into how Jane Street manipulated Indian markets to accumulate big revenues, markets regulator Sebi found that the firm made earnings of Rs 43,289.33 crore (approximately $5 billion) in index and stock choices, while intentionally losing a billion dollars - Rs 7,208 crore in stock futures, Rs 191 crore in index futures, and Rs 288 crore in money equities trading.The net result: Jane Street made an overall profit of more than Rs 35,500 crore throughout all sectors throughout the assessment duration from January 2023 to March 2025.
Sebis investigation exposed the incredible scale of Jane Streets operations and the calculated nature of their technique.
Within the index options category, Nifty Bank options alone contributed Rs 17,319.26 crore, amounting to 40% of the overall index choices profits, making it the crown gem of Jane Streets adjustment strategy.Also Read|Described: What is Jane Street and how it made Rs 36,500 crore earnings by gaming Dalal StreetLive EventsThe Baazigar Playbook: How Jane Street Engineered Losses for Bigger GainsSebis comprehensive analysis exposes the elaborate mechanics of what the regulator calls Jane Streets Intra-day Index Manipulation Strategy.
Take January 17, 2024, for instance, when Nifty Bank opened dramatically lower at 46,573.95 compared to the previous close of 48,125.10, reportedly due to market dissatisfaction with HDFC Banks results.
However Jane Street saw opportunity in the chaos.In the early morning session, Jane Street performed stage among its strategy with military precision.
The firm strongly bought Rs 4,370.03 crore worth of Nifty Bank constituent stocks and futures, ending up being the single largest net buyer across Nifty Bank parts throughout this patch, by far.The scale was extraordinary.
In all stocks except HDFC Bank, Jane Street contributed 1525% of the whole markets traded worth an incredibly dominant share/concentration.
For viewpoint, the next highest individuals concentration was just 8.09%, compared to Jane Streets 23.21% in Kotak Mahindra Bank.But heres the masterstroke: while artificially propping up the index through massive purchasing, Jane Street all at once developed efficiently Rs 32,114.96 crore of bearish positions in the much more liquid Nifty Bank index choices by purchasing inexpensive Put alternatives and selling expensive Call options.The artificial assistance produced ideal conditions for Jane Street to enter alternatives trades at beneficial prices, with other market individuals deceived by the inflated index levels.Sebis granular analysis of the first eight minutes (9:15 AM to 9:22 AM) reveals the surgical accuracy of Jane Streets adjustment.
During this brief window, the company acquired Rs 572 crore worth of stocks and futures in 6 significant Nifty Bank components.The impact was instant and remarkable.
The Nifty Bank index moved significantly from 46,573.93 to 47,176.97 throughout this patch, a rise of over 600 points.
At the same time, Jane Street had produced efficient cash-equivalent brief Nifty Bank direct exposure of Rs 8,751 crore over 15 times their Rs 572 crore position in money and futures.In the afternoon, Jane Street executed the second stage with equivalent aggressiveness.
The firm reversed and dumped the early mornings purchases, and net sold Nifty Bank component stocks, stock/index futures to the tune of Rs 5,372.12 crore.The outcome was predictable: The resultant downward pressure on Nifty Bank at expiration permitted JS Group to benefit immensely from their exceptional net short cash-equivalent positions in the Nifty Bank index options segment.Jane Street scheduled a purposeful trading loss of Rs 61.6 crore in money and futures but made a profit of Rs 734.93 crore in Nifty Bank index choices a return ratio of nearly 12:1.
Sebi was indisputable in calling Jane Streets technique manipulative, specifying: What distinguishes the trading pattern of the JS Group as described above as prima facie being manipulative is the intensity and sheer scale of their intervention in the underlying element stock and futures markets, the fast turnaround of these big and aggressive trades in cash and futures with no possible financial rationale besides the concurrent activity in and influence on their positions in the Nifty Bank index choices markets.The regulator highlighted that there is little or no financial rationale to validate such large and aggressive intraday trading activity in stocks and futures on a standalone basis.
Given the large size, hostility, way of trading, and transaction expenses included, standalone, such activities could more often than not end with net trading losses.The Systematic PatternThis wasnt a one-off incident.
Throughout 15 evaluated days, Jane Street reserved an overall intraday trading loss of Rs 199.7 crore in their activities in the Nifty Bank constituent cash stocks and futures markets, while making profits of Rs 4,474 crore in Nifty Bank index options.Sebi concluded that the demonstrably large and aggressive trading behaviour of JS Group in the Nifty Bank constituent stocks and futures had little standalone financial rationale, other than to manipulate the prices of securities and benchmarks, to deceive, lure, or trigger loss to participants in the index alternatives markets.Perhaps the most damning evidence was Jane Streets organized method to incurring losses.
Sebi noted that incurring losses in cash and futures markets in a deliberate and organized manner is itself unusual and a sign of fraud.These losses, the regulator found, were sustained as part of the manipulative gadget to affect the benchmark indices and profit from the positions taken in the index options, making them integral to the scheme instead of genuine trading losses.The VerdictSebis investigation exposed a sophisticated adjustment scheme where Jane Street weaponised deliberate losses in some sections to create significantly larger profits in others.
The technique represents among the most complicated cases of market manipulation ever recorded in Indian monetary markets.The Rs 35,602 crore net profit stands as a plain statement to the efficiency of Jane Streets technique even as it highlights the vulnerability of Indian markets to extremely collaborated, well-funded, and methodically carried out adjustment by worldwide players.Also Read|Jane Street result: Nuvama shares slump 7% after Sebi order.
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