Sebi action on Jane Street highlights 3 elements of market: Uday Kotak

INSUBCONTINENT EXCLUSIVE:
In the wake of market regulator Sebis sweeping crackdown on U.S
trading firm Jane Street, billionaire lender and creator of Kotak Mahindra Bank, Uday Kotak, has actually flagged three key concerns about
the structure of Indias stock markets
He cautioned versus the increasing supremacy of cash power, the expanding space between single-stock and index derivatives liquidity, and
company models that prioritise volumes over fundamentals.Recent stock market actions signify 3 aspects: cash power, low liquidity in single
stocks vs
index derivatives, exchange, broker organization models linked to volume, less to basics
Primary role of market is to promote capital development, fair cost discovery, Kotak published on X (formerly Twitter) on Saturday, July 5
Kotaks remarks come a day after the Securities and Exchange Board of India (Sebi) disallowed Jane Street Group and four affiliated entities
from Indias securities market and purchased a freeze on Rs 4,840 crore in supposed illegal gains.A crackdown on expiry-day manipulationLive
EventsIn a 105-page interim order released Friday, Sebi accused Jane Street of deploying high-volume, cross-segment strategies to manipulate
the Nifty and Bank Nifty indices, misinforming retail traders and booking huge benefit from index choices
The regulator said the company created more than Rs 36,500 crore in net revenues in India in between January 2023 and March 2025, of which
Rs 43,289 crore originated from index options alone.The order stated Jane Street used a method called Intra-day Index Manipulation on 15 of
the 18 expiry days Sebi analyzed, which involved buying big amounts of index constituent stocks in the morning to synthetically push up
prices, while holding big bearish bets in the derivatives market
These trades were later reversed to drive down prices, profiting from the fall.On January 17, 2024, a day Sebi described in detail, the
company presumably bought Rs 4,370 crore worth of Bank Nifty stocks in the morning, producing a deceptive sense of strength
At the same time, it built Rs 32,114.96 crore worth of bearish choices positions
By the afternoon, it reversed its money market trades, pressing the index lower and booking Rs 734.93 crore in benefit from derivatives, its
greatest single-day gain in Indian markets.The sales are aggressive, in a manner that pushes down rates in the element stocks and hence
index
JS Group books losses in intraday cash/futures market trading, the order stated
Earnings in index options more than make up for the JS Groups losses.|Rs 735 crore in 1 day! Jane Streets most rewarding day on Dalal Street
was developed on Nifty Banks fallRepeated warnings, installing concernsSebi stated it first started evaluating Jane Streets trades in April
2024, and released a cautionary letter in February 2025 through the National Stock Exchange (NSE), alerting the firm to avoid such patterns
Despite this, JS Group continued with comparable trades, in disregard of the caution letter from the Exchange and JS Groups own dedications,
the regulator noted.On 3 other expiry days, the company presumably deployed an Extended Marking the Close technique, putting big sell orders
in the final minutes of trading to depress index levels, thereby benefiting short-call or long put positions.Sebi composed that the company
was regularly running what seemed by far the largest risks in cash comparable terms in F&O especially on index alternative expiry days, and
that other traders were uninformed of all this, and were hence lured to deal at a time that the Nifty Bank itself was being artificially and
temporarily propped up.Jane Street respondsJane Street has denied any misdeed
Jane Street disputes the findings of the SEBI interim order and will even more engage with the regulator, the firm stated in an emailed
action to Reuters
It added that it is dedicated to running in compliance with guidelines globally.The company, which began its India operations in December
2020, has 21 days to respond to the Sebi order or obstacle it before the Securities Appellate Tribunal.As of Friday, 4 Jane Street-linked
entities JSI Investments Pvt Ltd, JSI2 Investments Pvt Ltd, Jane Street Singapore Pte Ltd, and Jane Street Asia Trading Ltd have actually
been prohibited from purchasing, selling, or handling Indian securities, and their accounts have actually been put under a debit freeze.How
Sebis crackdown on Jane Street unfolded: A 15-month path of analysis and neglected warningsKotaks post echoes more comprehensive issues
raised by Sebi in its investigation: that the marketplace has slanted too far in favour of high-frequency, algorithmic techniques, while
retail financiers trade on distorted signals
The regulator pointed to a growing imbalance, where foreign and proprietary traders made over Rs 610 billion in FY24 through such
techniques, almost matching the losses taken in by retail individuals.