Jane Street barred from Indian markets as regulator freezes $566M
1) buy large volumes of stocks and/or stock futures that are part of an index tracking India’s banking sector, early in the day,
2) subsequently place large options trades, betting that the index would decline or volatility would spike later in the day, and
3) later in the day, cash out of the large long positions, dragging the index lower, making far more money on the options trades than on the long positions.
Jane Street can and likely will claim the firm was only arbitraging away pricing inefficiencies, nothing more, nothing less. It was just business as usual, etc., etc.
However, given the scale of the operation, Jane Street's actions sure look like textbook market manipulation. Calling it like I see it.
Define buying a house.
an "information technology" degree that teaches React and stuff is not engineering.
This is the last website I would imagine people complaining they can't buy a house.
an "information technology" degree that teaches React and stuff is not engineering.
Lol, is that really what you think I meant by real engineering? You have tunnel vision for computer tech.
This is the last website I would imagine people complaining they can't buy a house.
Even Senior+ level SWEs at FAANG's in Silicon Valley have trouble buying homes there. The costs are absurd.
You can buy an f'ing house. In places like Ukraine people make $100/month and apartments are $50k(and I'm talking before the war). There, it's LITERALLY impossible.
What people here are describing is that things should be better, and I agree, but words matter.
In 2021, the median annual salary for software engineers in Ukraine ranged from $30,000 to $48,175, depending on location and experience. Some specific figures include $30,000 in Kyiv, $29,000 in Lviv, and $24,000 in Kharkiv. Remote software engineers in Ukraine had a median salary of $48,175.
It's quite below the EU median, but definitely not $100 a day.
BTW $100 a day is $12.50 a hour, which is more than the federal minimum wage in the US ($7.50 or so), and only $4 below California's minimum wage, $16.50.
Average mechanical engineer salary (mid-career) = £45k Max mortgage based on salary = ~£200k Average house price = ~£292k
-> Most people with an engineering degree cannot buy a house
Most people with an engineering degree are probably in a relationship, so they don't need to buy a house on a single salary.
There are plenty of houses for sale below the average price, just as there are plenty above.
Buying isn't necessarily the best option anyway. House price returns in the UK are somewhat below stock market returns, so as a pure investment it doesn't make sense. Unfortunately, we have the narrative in the UK that we should aspire to own houses, but that doesn't mean it's necessarily correct!
Most people with an engineering degree are probably in a relationship
This doesn't feel like a valid assumption.
Unless the demographics of those with engineering degrees is significantly skewed towards singles, this feels like a very valid assumption. Of course, you might have access to better statistics by profession.
[1] https://www.ons.gov.uk/peoplepopulationandcommunity/populati...
When the incentive instead rewards "how much money can you extract from others without improving their lives at all" we've headed in a very dangerous direction. You get the "we can make more money by making our product more aggravating" motivation that leads to dark patterns and all sorts of problems.
This sort of market manipulation stuff is just a very clear example of this pattern. Smart people not building useful products but instead fighting to crank a machine so that it spits more money in their direction.
Smart people not building useful products
worse, those are the active smart people doing that.. for each one of them there are a hundred others trying to do everything and anything to become one of those.. its a pyramid. The competition between individuals is a feature. You bet it is on the lips of every one of those individuals their "top" credentials that sit them in that trading seat. In other words, for every quant geek on that trading group, there are a thousand other "almost top" people using their time, talent and effort to try to be one of those inner circle ones.
A hardworking and smart person in tech really doesn’t need to try hard or sacrifice much to live a comfortable life in terms of finances. Hard part is the rest of the things in life really.
Aligning incentives so that what's good for the individual is also good for society is a politician's job.
Imagine becoming highly educated and then just using that ability to cream off the output of people who labour every day producing things that are actually useful. The tragedy is all the signals from society are saying this ok. Nobody questions the money. I got excited thinking we would 15 years ago, but nobody cares.
I guess if you're bright enough to come up with a solution you could be like Satoshi, or you could just work for Jane Street and suck as much as you can before you die.
certain demographics
Huh. Interesting point. I guess I never thought about it when JS were the secretive OCAML hacking prop quant fund, but if they become just another use-size-to-win badguy I can see the angle.
Jane street on the other hand is arbitraging against regular folks money, so they can distribute the gains to their select high value clients. There is no free office productivity suite and limitless "How to repair cell phones to start your own business" videos distributed to everyone for free.
In a way, they are doing opposite functions. Ad media takes from people who buy stuff and gives to people who don't (or cant't) buy anything. Jane street and their ilk take from regular people and give to those who have everything already.
the finance industry doesn't produce anything of value. it just turns $1 into $2 and liquidates productive industries.
people who get stuck in finance - especially trading - are not that bright IMHO compared to the hopelessly curious stubborn ones who go into philosophy or hard sciences or other areas of research.
But is it really? Is buying a lot of stock and selling it later really something that takes a genius?
And doing so without being caught for market manipulation might require genius that surpasses the human limit.
If options & futures are more liquid than the underlying, someone will be tempted to nudge the underlying.
Bond ETFs and their options chains seem like another locale where this could happen.
> If options & futures are more liquid than the underlying, someone will be tempted to nudge the underlying.
Why is the adjective "more" important here? Even if less, the opportunity to profit is still good, assuming that one chooses the path of market manipulation.
> What matters is the volume rather than the liquidity per se
> The exception is when there's a derivative market that has more volume than the underlying
What is the difference between volume and liquidity for the purpose of this discussion?
You're the one asking "Why would liquidity matter here?", you tell me. Like I said, they're correlated well enough that it doesn't really matter as far as I can see.
This is wildly rare in public markets.
Yes, but it's what happened here.
https://www.nasdaq.com/articles/what-gamma-squeeze-understan...
but I can't fully convince myself such a large stock can be manipulated like that.
I have the same initial reluctance to believe it that you do, but less so when I remind myself that we live in a world where the Social Security Administration sent out a mass email praising the passing of the "big beautiful bill".
I think our built-up understanding of how the US government functions at a baseline has not caught up to recent events. Especially in regards to how much regulatory bodies are doing their traditional jobs vs being forced to sit on their hands, or in some cases just not even existing anymore.
> Coined in 2023, the group consists of Alphabet, Amazon, Apple, Meta Platforms, Microsoft, Nvidia, and Tesla.
and refused to update their prior when they lost money day after day
The market takes money from people with incorrect beliefs about economics and gives it to people with correct beliefs. ~~What is the problem here?~~
On second read, I think the parent was just intending a factual statement, which I am willing to agree with.
Edit: Reading more about this, it looks like the counterparty is often a bunch of retail investors doing quick trades hoping the stock swings one way or the other, and that's not bullying that's gambling.
Black-Scholes is just a customer-facing description of the option (i.e, it provides greeks that everyone can understand). But it isn't used as a starting point.
In practice, MM will back out what the implied volatility is from current prices. Then a stochastic volatility model is calibrated against that.
That changes the description of part 2 to "subsequently experience retail investors placing large options trades with them" which is much more defensible market making behaviour - their early buying was in anticipation of later demand and really did involve taking a risk.
The truth is probably somewhere in between.
If the SEC did investigate you for this, an important part of the case would turn on the extent to which your actions were "bona fide market making". And the regulator would also be more introspective about the market structure that allowed this to happen - why is there only one market maker? How did we allow a derivatives market much more liquid than the underlying?
Low volatility is good for everyone engaged in long term asset management.
According to who?
There are plenty of pension funds nowdays that have people specialized in picking up mid sized companies after big drops.
(one of the Yes Minister irregular verbs: I am providing liquidity to the market, you are long vega, he is a degenerate gambler)
> what moron
> However, given the scale of the operation, Jane Street's actions sure look like textbook market manipulation. Calling it like I see it.
Finally, in my view the India SEBI rules are insanely vague and are written to grant a lot of leeway to the regulator.
The real problem that no one is talking about: Why is India allowing its derivatives markets to explode? An estimated NINETY percent of retail derivs "investors" (I prefer the term "gamblers") lose money in India. Lots of these loses are gains for foreign banks and hedge funds. India: What the hell are you doing!?
The size question is important here due to the fact that large quantities are likely to influence price (and everyone knows this) so you might need an strong alternative explanation for your actions.
I think eToro disclosed that on their app, people using CFDs were losing money 76% of the time.
But maybe Jane Street only traded like this on some days, so you would need to know whether they had done so before you could hope to exploit them.
How would you have identified that there's even such a thing as a manipulation day? Do you have a model that tells you the objectively correct number of days a non-manipulated index should be lower at close?
People may recall the matter involving Adani Group. https://hindenburgresearch.com/adani-update-sebi/
To say it plainly, SEBI has been exposed for their selective enforcement on high-profile entities. If Jane Street’s in trouble with SEBI then it’s only because they failed to secure the same privileges as Adani, or Karvy, or Ramkrishna, or Sapre, or Kamath.
> Seems presumptive to slander an entire nations regulatory group on a single/couple of examples.
Examples of the 2023-2025 activities of the Indian securities regulator SEBI seem pretty relevant to current news involving SEBI here in 2025. Which is the topic of discussion. Whatever US regulators were doing in 2008 has nothing to do with this.
The difference can be subtle, and I often joke that the difference between legitimate trading and manipulation is whether you send your colleagues an email saying “lol I sure manipulated that market.”
https://www.bloomberg.com/opinion/newsletters/2025-07-07/jan... (https://archive.ph/20250708012725/https://www.bloomberg.com/...)
It’s all hearsay; I’m just reporting what I heard. I don’t know the implications of it, but maybe this isn’t exactly uncommon behavior, even if it’s market manipulation.
The coworker said that the money flowed overseas too, if that helps contextualize it. No SEC, no problem, right?
Looks like Jane Street is an American firm, so, this all lines up and corroborates what you’re saying. What we’re seeing is probably the first time a government other than the US has reacted to this behavior.
However, given the scale of the operation, Jane Street's actions sure look like textbook market manipulation.
Everything is public. How is Jane Street manipulating the markets? Feels more like the Indians are sore losers because they couldn't see the patterns that Jane Street did and they lost some money. They should up their game, not punish the winner.
- They were taking a substantial risk.
- They were manipulating the market.
Your first sentence is somewhat accurate, your second is not at all, specifically "just".
If you’re trading a large % of the market volume or your orders are large relative to anyone else, you can’t claim to be arbitraging as you are executing way beyond the capacity of any kind of arb. You’re just doing the old fashioned abusive market corner in fancy clothing.
I imagine Jane Street will also justify this with some EA bullshit, or like Soros during the 97 crisis just say "someone would do it ; may as well me".
After reading the Matt Levine piece posted by https://news.ycombinator.com/item?id=44497566 , I'm no longer sure this is market manipulation.
The devil is in the details, and the details disagree with my initial take, so I'm changing my mind.
> HFT style manipulation skimming money from everyone else in our markets
More importantly, there is a lot of debate around what value HFT provides to markets, all I'm saying is that in general the Indian public does not believe its a net positive and SEBI acts accordingly. Maybe you disagree, that's fine.
Which is fine, that's how the Indians prefer it. Not every place needs to be the same.
Even if you are purely a stock picking buy and hold value investor, you will feel the reverberations. The modern market is deeply interconnected, and what Jane Street is doing here is literally moving the entire index volatility complex to pick up a modest billion a year. Let's say your small cap value stock issues some converts. A hair of that trading strategy will be embedded in the pricing model for the converts, and it will slightly change the cost of the debt for the company. Once you get out to 3rd 4th 5th order effects, it becomes a very faint influence, but when you consider that some of these market making/HFT trading practices at the core of the market are so deeply interlinked to just about everything that prints a price on a screen, it should be apparent that there is value in keeping the core areas of the market like the index volatility complex as clean as possible. Now weather Jane street's trading is just Irving price differences and improving the efficient market, or market manipulation, well that's another question, but the general rule of thumb is if you're using gigantic size to force bids and asks around, that's at high risk of being considered market manipulation that is toxic to market function.
Yes, these are very small effects. Despite profits of 1 billion per year, trades on major index level aren't directly going to impact regular people in a highly visible way. That's arguably the insidious part, because it adds up, and occasionally this sort of thing leads to major negative financial events/crashes. The passive investing/index complex anchors the entire tradable financial system. It's massive in scale and attributes like index level volatility are innately tied to many other variables all throughout the system.
There's a good (relatively light and readable) paper called Liquidity Cascades which views the market through this lens of interconnected feedback loops which can sometimes have unintended consequences. That's another major reason you don't want HFTs and prop firms getting too crazy. It's not just about measurable impact in the real world timelines, it's also about pruning the tails in the far out distributions of the possibilities space - and the world has fat tails so it's prudent to mind the tails... The 2020 crash is a great example of a feedback loop that fed on itself until it destroyed the entire interconnected system within a few days and demanded central bank intervention (COVID was a catalyst, not a cause. The basis-trade was fragile, and a dynamic hedging feedback loop took broke the volatility complex and took out equity markets -40%, at which time the effects were most definitely felt in the real world as the Fed had to step in with 1 trillion, and they then entered a badly managed panic phase (which is on them, but still...) which very much contributed to the inflation wave and the housing price surge which locked out a generation from affordable housing).
Over the past 5 years the tail has really started to wag the dog in derivatives markets, and it's an extremely well orchestrated battlefield now. One of my acquaintances who sold a 4.5 sharpe ratio firm and clears 50k a day casually trading futures seems to spend a good amount of his day tongue-in-cheek complaining about this. As do we all. I'm a PM as well with an options book, and trade options in parallel in my personal accounts, and during the day we chat in a room and watch flow move around in index options, because the option positioning drives price. Watch the flow, reverse engineer the hedging activity, map out the implied liquidity, and join the bandwagon and pin/grind down price to these option levels. That's the game currently, and you either participate or you have negative edge. In single names as well, often the option landscape dictates price discovery.
Like you said, at first glance it's just snakes eating snakes, and arguably to a beneficial end as we all get a more efficient market at the end of the day, but is that necessarily the case?
All participants agree that there need to be some boundaries against activities like outright spoofing, submitting a fake takeover offer to major news outlets, etc. That's because it's immediately obvious that these activities detract from market function. They detract from the utility value of the market to society.
So let's take the general example of "options moving the market" on an industrial scale above, and give two more recent, bigger examples of how it can cause problems. Not criminal problems and still fairly arcane, but maybe something that shows we should be better designing our systems to manage transparently. These tidal forces of index option flows became so dominant in... I think it was Aug '24, that a large correlation bubble grew under the surface. The mechanics aren't important, but in short the mega-cap names were all perfectly anti-correlated as a result. One moved up, the other moved down, yet the indexes moved zero. Risk was building under the surface, like a roller coaster's chains clicking up a ramp. This was arguably spurred by index options overwhelming all other market forces (which ties back to the original article, except Jane would have been weaponizing these forces in an engineered way). Well this emergent mechanically driven bubble grew and grew, until voices started speaking up, and there was an almost self-fulfilling prophecy where it ballooned to absurd degrees (multi decade extremes) and then caused a small market panic event where volatility exploded and some giant mega-caps crashed for a bit.
Distill the above event, and what you're seeing is a "new" kind of boom/bust, cyclical price discovery anchored off of option flow, that I personally argue generalizes to the entire market now. And the questions to ask are questions like "is this contributing to the utility of markets? Should better guardrails be in place? Are we building systemic risk?" You know, questions regulators used to ask before they mostly went dark. In this new paradigm, most of the time options dominate price discovery, and any participant fighting these forces just gives up their money to those that are playing the game well, which reinforces the behavior. Every once in a while these hedging forces release their grip on the market, and we get some short burst of violent, pent up price discovery, before the option forces close back in and greek math like vanna and vomma dictate price discovery once again.
So the first conclusion I'd argue here is that transparent and organic price discovery is one of the major utilities offered by markets. If we're only getting organic price discovery in short violent burst every once in a blue moon, we're getting less information on what market prices infer about the real world. A parallel would be QE and painting the tape on the global bond markets, which drew an opaque veil for over a decade over a market which historically has been critically important as an input into many areas like financial risk management (and again, contributed to the horribly managed and prepared for real world inflation wave).
The second conclusion is that all of this is contributing to systemic fragility, which is an important enough real world metric to manage that it's baked into the core of the US central bank mandate, for example. A correlation bubble tanked Nvidia by 10% in a day, haha!... sure, but that isn't healthy, and roll the dice 10x, maybe 2 outcomes would be a more major crash, and sometimes these events go to very bad places, like the events that spurred the GFC (beyond the major trading institutions blowing up, there was a sort of quant collapse much like the correlation bubble above that actually was the initial spark of the GFC). It's just easier to manage problems if it's not a fiery explosion, so we should generally try and minimize nitroglycerine in financial markets...
On a more anecdotal level, these sort of extreme, late stage situations like "Jane Street weaponizes index options and pulls a billion a year out of Indian markets" are rarely good omens for healthy market function. What the market generally does is seek out weak points and incomplete models, and make it increasingly obvious via absurd situations until participants or regulators are forced to change behavior. If the system is not "working" and nobody cares, a sort of malicious nihilism creeps in to the financial space. Like the bankers laughing about MBS before the GFC after work at a bar in NYC, or prop traders saying "fuck it, let's double our size next year" while laughing about opponents getting crushed after their coordinated rush on liquidity tanks markets at the end of day like clockwork when it suits them. Most of the time financial markets reach equilibrium, but sometimes these things accelerate in odd directions, which is why we manage financial markets.
I'm not so sure some of the topics referenced above are terminating in a healthy equilibrium.
> on such a simple scheme
Nobody wants to commit as much to Indian markets because it's relatively primitive compared to more lucrative markets such as the US, China, etc. Jane Street was an outlier in that they took a bold bet on executing this manipulation strategy. Hence they readily dumped in billions, with an assured annual 1B profit. Because there are not many players to dig in and track their moves, they went largely unnoticed by other players.
but many large-scale HFTs today operate in ways that either stretch the legal boundaries or exploit regulatory gaps. Many practices arguably amount to market manipulation in spirit, even if technically legal.
Can you expand on this?
the regulators are either too lazy, stupid, ill equipped or uninterested to do anything about it.
Or it's their friends doing it and they're not uninterested, they're very interested in ensuring it continues.
I can see how it would be awful in countries that have a common law system, but I am not sure I am completely against it in most of Europe.
I can wrap my head around why/how options for physical commodities give price stability for sellers and buyers. But at first glance I struggle to see how derivatives are beneficial in the equity markets. The argument is that derivatives increase market efficiency (more accurate pricing) over what just a simple buy/sell market would give you right? But how valuable is this increased efficiency? Obviously is super valuable to the people who work in finance, but how valuable is it outside of that context?
Related: My biggest concern: There should be more gatekeeping around allowing retail traders access to derivs markets due to the implied leverage in the contracts. That said I don't know a good way to gatekeep. How about an exam?
Related: My biggest concern: There should be more gatekeeping around allowing retail traders access to derivs markets due to the implied leverage in the contracts. That said I don't know a good way to gatekeep. How about an exam?
In the US, investors need approval to trade options. https://www.investor.gov/introduction-investing/general-reso...
I assume it's a compliance requirement, they get a record of me having said the right things at one time and don't really know if I got someone else to tell me what to answer. Still, I think it's actually keeping some people out, judging from some forum threads where they try to get help to pass and seemingly fail even though others are telling them basically what to respond with.
Options are then futures where you don't necessarily have to close out the position. They are a means of insuring against price changes .. or to get paid for providing such insurance.
However, in things like farming and oil exploration much of the risk is real and physical. The further away you get from that to derivatives of other financial instruments, the more it becomes just a mix of what the other market players are doing.
Then there's "we priced these risks as de-correlated but actually they're correlated", which blew up a lot of people in 2008.
It’s all about being able to control the risk/reward profile of a trade. Options can be deployed cautiously or recklessly.
If you own stock, you can sell calls against it — especially if premium is high to hedge against drops. If you are short stock, you can buy calls to hedge against short term movement.
I personally don’t think they improve price discovery because market microstructure through options and mm exposure affect pricing.
This is very important for pension funds and so on because they have fixed liabilities like outflows.
All these things are is a way of moving risk around. Some people want risk, some people want to hedge — it's just as true for wheat as it is for bonds.
It's not so much price as risk.
More abstractly derivatives let traders in one asset pay premia to offload risk to other traders who are more able to absorb it. This way everyone has what they want and the market functions more efficiently. It's very similar to insurance (and you can actually model insurance like a portfolio of long/short put+call options with a probabilistic (event dependent) multiplier.)
It’s just political. Who is allowed to manipulate and who pays their dues to be able to.
In this case it was Millenium ratting out on Jane Street (edit - other way around), but now the entire HFT (Edit: hedge funds. Thanks for the callout avvt4avaw) industry is under extreme scrutiny by SEBI as a result[0]
[0]https://www.sebi.gov.in/enforcement/orders/jul-2025/interim-...
Jane Street's kvetching about Millenium showed the spotlight and now everyone will be getting the hammer ("iss hamam mein sabh nange hain"). Jane Street was also dumb enough to do this during the General Election, so now Indian regulators have to do something. This plus the Adani prosecution is a quick win to restore confidence in SEBI.
This behavior became common in the Indian market after the newer HFTs (Edit: hedge funds. Thanks for the callout avvt4avaw)
You weren't wrong. All market making is now electronic and all electronic market making is done at a speed only available to HFT firms, so the previous comment reply to yours saying that Jane Street is a market maker but not HFT, is more than a little silly. The Citadel being referred to here in this reporting is also the market making (hence HFT) one, so their attempted correction on that made little sense either.
All I know is a set of firms like Millenium, Citadel, Jane Street, etc ki gaand phatne wale hain. You don't pull these kinds of shenanigans during or in the run-up to General Elections, Bihar Assembly Elections, or UP Assembly Elections. People have been screwed over for less.
I don't see how elections are relevant here
Everything revolves around elections in India. It is a highly political environment and elections are a big business (just getting a party ticket nomination to campaign for an MLA seat itself costs around $10-20 million).
And the public sentiment against big business in India has gotten much stronger lately due to the past several years of inflation. Jibes against Adani and the stock market crash in 2024 after the General Election solidified that view.
If not Bihar, then West Bengal
West Bengal state elections don't matter - it's not a swing state, and the local TMC has removed any breathing room for other parties like the BJP, INC, or CPIM in the WB political arena.
Bihar on the other hand is a swing state which is up for grabs this year due to the succession crisis within the ruling JD(U), and it's election is always used as a petri dish for messaging and campaigning across Hindi-speaking North India.
The Bihar and UP state elections always set the tone for the General Election. The others are important, but nowhere near as important.
Millennium and Citadel are both hedge funds, who do not engage in market making at all. They are most similar to other multi-strategy hedge funds like Balyasny or Point72.
You may be thinking of Citadel Securities, who are a market making firm and do engage in high frequency trading. Other large and well known HFT firms include Hudson River Trading, Tower Research, Jump Trading, Virtu, IMC and Optiver.
Jokes aside, I appreciate callouts and/or corrections!
And on top of that - don't make such squabbles public during a GENERAL ELECTION, thus forcing politicans to cleanup shop.
Same thing happened to Adani Group, as their scandal hit during the run up of the 2024 GE.
Now both Adani Group and the HFT industry are under severe scrutiny due to the upcoming Bihar Elections, which is used a sandbox to test messaging by the opposition and incumbents in preparation of the next General Election and other state elections.
The alternative claim - that large traders do not make decisions based on how their activity will move the market, is of course absurd.
No, that's de riugeur for any large firm. You or I can buy a stock without changing the market, but if a bank or hedge fund wants to buy or sell millions of dollars of a stock they very much have to worry about execution. The price they receive for a trade will be worse than the market price, simply because the price will move once it's clear that someone is making a large block trade.
This is also why hedge funds worry about their 'alpha'. Even when they have found a good basis for a trade (e.g. an as-yet unexploited correlation), taking a position to profit on that trade moves prices in ways that eliminate that edge. That's the efficient market hypothesis in action.
The very odd thing here is the allegation that Jane Street could make perfectly ordinary market transactions in liquid securities and somehow have the market move with their net position. This is extremely unusual.
Second part: Typical HN when discussing public markets. Zero evidence provided, except "my tin foil hat works".
If large movements of money manipulate the market then when would “manipulation” be used to claim an actor was misbehaving?
1) they did a special kind of manipulation clearly against the rules 2) they didn’t do anything different, but the regulators decided they didn’t want them to.
2 would be exactly what I said - their activity has acquired political interest.
> Jane Street sued Millennium, Schadewald and Spottiswood in April[2024], claiming the two traders had taken an “immensely valuable” trading strategy with them. It later emerged at a court hearing that the strategy involved India options and had generated $1 billion in 2023 profits for Jane Street.
1) How do you approach mlp? They don't just give you an account, they have risk officers, compliance officers, and general strategy due diligence.
2) If you manage to get past it, what then? Say mlp just asks some superficial questions and sees the dollar signs. Are you going to do the same thing? You have to think the compliance people will complain, surely?
3) So maybe the strategy they actually approached with was a parasitical strategy? If you know which stocks will be bought and sold by JS, maybe you do jump in first? Especially as you'll know particulars like when it happens, which stocks are selected, and how to spot them.
Maybe they do have teams running prop style strategies but I would guess that if you snapped the book at a given second you'd probably miss the alleged secret sauce.
Crazy eh
Need to ask my mlp friends lol
As I read it they were just smashing underlyings to move the close price and profit from larger derivative positions... which is the most intuitive strategy I ever heard. There must be something more here right?
Also need to keep an eye on where you predict price is going naturally, don't want to be left fighting price uphill on wrong day
I wonder to what degree the lawsuit is what got this on the radar of the Indian authorities. Maybe they should have listened to Stringer Bell.
India retail investors make up 35% of options trades. Institutions, seeking to hedge their risk or profit for their companies’ accounts, handle the rest. Regulators are alarmed that regular folk are bypassing the tried-and-true way to build wealth: buying and holding stocks and mutual funds.Instead they’re engaging in pure speculation. The average time an Indian trader holds an option is less than Instead they’re engaging in pure speculation. The average time an Indian trader holds an option is less than 30 minutes, according to data from mutual fund provider Axis Asset Management Co. “If you want to gamble, if you need diabetes and high blood pressure, then go into this market,” Ashwani Bhatia, a board member on the nation’s top stock market regulator, said last year.
https://economictimes.indiatimes.com/markets/options/indias-...
While what JS did would likely be allowed (borderline) in many other markets, it would be looked at highly suspiciously in India. The underlying narrative is clear, where Indian retail traders are green and need more protection to invest their wealth rather than simply earn interest (India's saving interest is 3.5% and a fixed deposit pays at 7.5%). SEBI also banned shortselling in India for a similar reasons of protecting retail investors. Even institutional investors who can short are not allowed naked shorts or closing their positions in short period (within a day). SEBI values market stability.
Overall, Indian traders are inexperienced and not as aware when it comes to options, so expect a regulator to be extra strict here. Free market is a good argument, but that has never been an explicit prerogative for the regulator. When SEBI cautioned against options, they cited speculative bets and disadvantage against institutional investors.[1]
[1] https://blog.liquide.life/sebi-new-rules-options-trading-imp...
Though usually short sell bans are not done to protect investors but companies, to protect companies from investors who might know something.
The thing is, Jane Street still consists of some of the smartest people in the room. Getting into markets like this and making large-volume trades is no easy feat. We often equate algorithmic prowess with investment intelligence, but in reality, navigating the legal and regulatory requirements is the only edge you have in trading these days. It’s very hard to figure this out as an international firm. Jane Street did it, and they deserve kudos for it. Trust me, if it were an Indian firm making the same moves, you wouldn’t have heard about it.
You’ll see Jane Street will pay a fine and come out on top. This is because they plan for these things with the expectation that regulators will make a scene about it.
You’ll see Jane Street will pay a fine and come out on top
Maybe, but the stain on their reputation is hard to wash off. They will forever be known as a manipulator.
What was a geeky ocaml wielding quant shop is now viewed as plain-old manipulating crooks with a nerdy veneer.
Your genius physicist hedge fund operator who "broke the game" in the investment world ended up paying $7 billion in a tax settlement[0]. There’s no algorithm—it’s all about regulations and manipulation. In the investment world, fines, "bureaucratic investments," and similar costs are just operating expenses. Guess what? Everything is a line item in a financial report.
You hire STEM researchers from Ivy League schools—why? You hire these guys, not just because they’re smart, but because they come with "back home connections" —maybe a multi-millionaire businessman for a father or a politician for an uncle. Nobody makes it to these colleges or financial institutions by merit alone. You need those connections. That’s entirely how finance works.
[0] https://www.wsj.com/articles/james-simons-robert-mercer-othe...
[1] https://www.matthewpowell.com/weekly-note/warren-buffett-ste...
Two strategies are detailed with trades: 1) expiry day price discrepancies between index options and underlying 2) expiry day painting the close
My “hedge” in this case is that I want to own the shares. (I’m short vs where I want to be.)
While these actions were not a breach of any regulation, SEBI said that the “intensity and sheer scale” of their intervention, and the rapid reversal of their trades “without any plausible economic rationale, other than the concurrent activity in and impact on their positions in the BANKNIFTY index options markets,” was manipulative.
I don't get the basis for regulatory action if they weren't in "breach of any regulation." Not a fan of financial skullduggery, but it does seem important for government agencies to play by explicit, non-arbitrary rules. (Or maybe this article just got it wrong?)
So the real difference between market manipulation and a canceled order is just intention, so regulators have to make judgment calls sometimes.
"market manipulation" in general is hard to define. The working definition in the US is something along the lines of "placing orders in the hopes that the price of the security will change in response to those orders existing, with no intention of actually executing the orders".
No, what you defined is "spoofing" - a much narrowed subcategory of market manipulation (which itself is gray, as you note). Market manipulation is broader and basically amounts to intentionally trying to affect the price of the security - even grayer.
There is absolutely zero illusion that Jane Street is acting in good faith. They know what they're doing is wrong.
After all the manipulation, all the crashes, all the exploitation - maybe it is appropriate to just say "I don't care if we wrote it down, we've had enough of this shit".
I assume Jane Street's version of this may have been unintentional: get your big position to do a bunch of intraday trading without worrying about being too short, then exit at the end of the day. This can work because markets tend to go up or stay flat intraday, meaning you get to use typical strategies in a jurisdiction that doesn't like when you go short via superposition. Then along the way, someone figured out this options trade and didn't realize their own behavior was influencing the price of the option (oops, I guess it wasn't superposition all along).
Jane Street's version of this was absolutely intentional.
[1] https://www.reuters.com/article/business/high-frequency-trad...
Non-paywalled FT article: https://archive.is/2025.07.06-105811/https://www.ft.com/cont...
This example has two common characteristics of market manipulation - using size to push markets in a direction for personal benefit, and putting the bid in with sole intent to push the market, as in there was never any desire to see the order actually get filled.
If Jane Street was selling options that were only profitable within the context of a strategy that involved pushing massive size into the market near market close and forcing price down, that is likely categorized as manipulation. On the other hand, if they were moving inventory and in the process moved price, and they tweak their trading strategies to further profit from this, that's a more arguable position.
Am I surprised they were cut off? No, not at all. They should be cut off in the West altogether.
Any situation where you can make bets on the market that pay off larger than the cost of the market it will lead to manipulation. This is no different than paying off the referee or the star players etc ... The only thing keeping this from happening is the threat of the law really or any adversarial change in incentives. But once a player or collective of players gets big enough, it seems likely this is happening even if it is not coordinated centrally.
It would be interesting if more people started to get interested in this problem.
I have seen defi stuff that literally bakes in the cost of moving price into the smart contract "market" which is interesting too but at the time of reading (a few years ago) I didn't see direct discussion of the boundaries of manipulation incentives in that domain. Would be interested to hear if anyone is deep in that rabbit hole recently.
Probably unrelated, no mention of Millennium.
We were probably able to find it because we did hedge quickly. Hedging costs money (trading fees, 1/2 spread) so some firms did it less often. We heard that Bear-Sterns only did it 1 time per day (around 4pm when spreads were small and over-night movement risk was nigh). They wouldn’t have caught this scam.
SEBI said that the “intensity and sheer scale” of their intervention, and the rapid reversal of their trades “without any plausible economic rationale, other than the concurrent activity in and impact on their positions in the BANKNIFTY index options markets,” was manipulative."without any plausible economic rationale..."
I had a bit of a laugh at this. I thought the rationale was to fuck the counterparties as hard as possible?
It would seem like Jane Street being allowed to operate in this market is like bringing an anti-material rifle to a pillow fight.
I had a bit of a laugh at this. I thought the rationale was to fuck the counterparties as hard as possible?
I think the intend was to convey that there was no economic or market situation in India that makes it a necessity.
Probably they were not speaking about profit motive.