Deciphering the reasons behind the Jane Street ban

Jane Street exploited India’s options market, raking in Rs 36,000 crore through undetected algorithmic trading. Few stories expose the fault-lines of India’s hyper-active options market like SEBI’s bombshell order against Jane Street. A pair of algorithm-driven entities – one registered in India, the other a foreign portfolio investor (FPI) – worked in tandem to nudge the Bank Nifty index just enough on weekly expiry days to mint an eye-popping Rs 36,000 crore in 27 months. Here’s the anatomy of the scheme, why regulators called it manipulation, and what it means for everyday investors. The two-entity set-up Jane Street created a domestic trading arm permitted to buy and sell stocks or futures intraday, while its offshore FPI book held large options positions. Losses booked by the Indian arm were more than offset – by design – by option