Daijiworld Media Network – New Delhi
New Delhi, Jul 14: Wall Street high-frequency trading firm Jane Street has deposited Rs 4,843.50 cr in an escrow account as mandated by the Securities and Exchange Board of India (SEBI), the market regulator confirmed on Monday.
The deposit comes days after SEBI’s interim order on July 3, which barred the US-based firm from trading in Indian markets until it deposited the said amount. Jane Street has since requested SEBI to reconsider and lift certain restrictions imposed under the interim directive. The regulator is currently reviewing the appeal.
In its interim order, SEBI accused Jane Street of engaging in "intra-day index manipulation" through aggressive and unhedged positions in Nifty Bank options and related instruments, which were rapidly built and unwound on expiry day. SEBI noted the trades lacked “plausible economic rationale.”
In response, Jane Street firmly rejected SEBI's allegations. In a communication to employees, the firm stated, “We reject the premise and the substance of the order in the strongest possible terms.” It maintained that its trades were driven by arbitrage strategies, exploiting a mispricing between options-implied and stock-based index values on January 17.
A graph shared internally by Jane Street reportedly showed a divergence between the index levels implied by options and the actual stock-based index price during market opening. “We traded in a direction consistent with closing that gap,” the firm said, adding that such trades improve market efficiency.
Although Jane Street has complied with the financial condition of the order, it reportedly does not intend to resume trading in India immediately and is expected to continue challenging SEBI’s directive.
Sources said that SEBI’s investigation into the matter may take another 6 to 9 months, after which a final report and show cause notice are likely to be issued.
For now, while Jane Street has completed the financial obligation, SEBI and stock exchanges will continue to monitor the firm’s market activities closely.