How 26-year-old traders profit big (allegedly)

In a recent legal case involving Daniel Spottiswood and Doug Schadewald, two former traders from Jane Street, it was suggested that the pair were potentially making significant profits by selling undisclosed secrets about an Indian options trading strategy to hedge fund Millennium. Although specifics about the strategy were never disclosed, Jane Street implied that the young traders could generate $150 million in just three months, whereas Spottiswood and Schadewald argued that the actual figure was closer to $4 million.

The allegations against the traders were never fully revealed as the case was settled before any details could be made public. However, a recent directive from the Securities and Exchange Board of India (SEBI) shed some light on how such substantial profits could be achieved. SEBI accused Jane Street, an electronic trading firm known for hiring highly skilled graduates, of making $4.3 billion through illicit trading activities in the Indian derivatives and cash market. SEBI alleged that Jane Street manipulated the market, particularly on index expiry days, to the detriment of small investors.

According to SEBI, Jane Street engaged in a scheme involving the ‘Bank Nifty Index,’ where the firm made large purchases of component stocks in the morning on specific days, coinciding with short positions in index options. Towards the end of these days, Jane Street would abruptly sell off these positions, causing a downturn in prices and allowing the firm to profit from its index options trading. SEBI deemed these actions to be deceptive, negatively impacting retail investors who were lured into trading at artificially inflated levels.

Following SEBI’s investigation, Jane Street has been temporarily banned from operating in the Indian market. This ban could potentially extend to the firm’s operations in other countries such as Hong Kong, London, and Singapore. Jane Street defended its actions by stating that it was merely managing market risks by adjusting its exposure to the Indian market. The firm suggested that these practices were inherent to quantitative trading, and it was merely too influential for the Indian market to handle.

Meanwhile, Goldman Sachs underwent significant changes to meet stringent capital requirements last year, which were based on the assumption that the firm could experience substantial losses in a severe economic downturn. However, the Federal Reserve revised its estimates, projecting much lower potential losses for Goldman in adverse scenarios. Consequently, Goldman was able to reduce its capital reserves, increase dividends, and alleviate constraints on trading activities and bonuses for its staff.

In other news, Barclays is halfway through a strategic initiative to enhance returns and reduce dependence on its investment banking segment. Deutsche Bank restructured its investment bank by regionalizing its operations, with new leaders in charge of specific regions. Lazard appointed Cyrille Cotte as the head of its European financial institutions group, while various hedge funds experienced significant returns in the first half of 2025. Furthermore, there is a growing recognition that artificial intelligence could reshape the job landscape, with predictions that half of all white-collar jobs in the U.S. could be replaced by AI technology in the future.