Jane Street plans to combat SEBI’s accusations of market manipulation, denouncing the claims as ‘inflammatory’.

Jane Street, a US-based trading firm, has made the decision to contest the market manipulation charges levied against it by the Securities and Exchange Board of India (SEBI) in relation to the Bank Nifty index. In an internal communication shared with Reuters, the company expressed its strong objection to SEBI’s actions, labeling the accusations as “highly provocative.”

SEBI recently took significant action against Jane Street, barring the firm from trading securities in India and seizing $567 million of its assets following a lengthy investigation into what SEBI believed to be manipulative trading practices within the Bank Nifty index.

Jane Street responded to these allegations, stating that they found them “deeply upsetting” and felt misunderstood despite efforts to address concerns and adapt their trading strategies accordingly. The firm highlighted that it had attempted to engage with SEBI multiple times since February, only to face rejection each time.

The Financial Times was among the first to report on Jane Street’s intention to challenge SEBI’s findings. According to SEBI’s conclusions, Jane Street was accused of engaging in a strategy where it amassed significant quantities of Bank Nifty index constituents in both cash and futures segments during the early trading hours. Concurrently, the firm took substantial short positions in Bank Nifty options, allegedly profiting from the artificial propping up of the index.

Sources familiar with the matter revealed that SEBI had expanded its investigation beyond the Bank Nifty index to examine Jane Street’s trading activities across other indices and exchanges. This move comes amidst SEBI’s heightened surveillance of the derivatives market in India due to escalating concerns about potential market manipulation. In April, India accounted for nearly 60% of global equity derivatives trading volumes, as reported by the Futures Industry Association.

As the dispute between Jane Street and SEBI plays out, the trading firm’s formal dispute is expected to trigger extensive scrutiny and discussions regarding the integrity of India’s derivatives markets and the regulatory challenges posed by global algorithmic traders in emerging economies. SEBI did not respond to requests for comments outside of regular working hours, leaving the case to unfold and potentially reshape the narrative surrounding financial regulations in India and beyond.