Jane Street barred from Indian markets as regulator freezes $566M

https://www.cnbc.com/2025/07/04/indian-regulator-bars-us-trading-firm-jane-street-from-accessing-securities-market.html

by bwfan123 • 1 year ago

521 324 1 year ago

bwfan1236• 1 year ago

I am shocked by the size of the retail index options traders. They are selling put options naked without any underlying hedges and getting fleeced as a result.

Two strategies are detailed with trades: 1) expiry day price discrepancies between index options and underlying 2) expiry day painting the close

steveBK1234• 1 year ago

My understanding is that it is the closest to legal gambling available in India and so the local market for gambling type behavior inflates the Indian options volume.

throwaway203720• 1 year ago

Why is this down-voted? Thank you to point out the elephant in the room.

kamaal• 1 year ago

Actually, There are more people on Sports betting sites(Dream11, Jungly Rummy etc) than people who have hold Demat accounts.

maest• 1 year ago

NIT: It's _marking_ the close. "Painting" has a different meaning.

sokoloff4• 1 year ago

Selling naked puts doesn’t seem particularly outrageous. About half the time that I want to buy a position, I’ll sell a series of put options just OoM until I get assigned the shares I want, collecting small premium along the way.

My “hedge” in this case is that I want to own the shares. (I’m short vs where I want to be.)

Fade_Dance4• 1 year ago

Futures index option traders are not looking to get assigned a basket of hundreds of stocks. They are cash settled, for one, so all that gets assigned is a profit or loss.

mhh__3• 1 year ago

This is why the flow is so valuable. The volume is pretty big, the spreads are enormous and the traders are terrible.

monkeyelite5• 1 year ago

The alternative claim - that large traders do not make decisions based on how their activity will move the market, is of course absurd.

It’s just political. Who is allowed to manipulate and who pays their dues to be able to.

alephnerd6• 1 year ago

Not really.

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-...

steveBK1234• 1 year ago

Yes as presented this behavior is clearly illegal. The next interesting question is if such an obviously illegal strategy was in use by JS, and they also produced the likes of SBF&co, what other related manipulation activity are they partaking in?

anonu3• 1 year ago

Didn't Jane Street sue Millenium first? I think the lesson of all this is - don't sue over your trading strategy secrets.

monkeyelite5• 1 year ago

I’m speaking broader than that. It’s impossible to move a lot of money without secondary effects. Any pretense that does not give you advantages is misleading.

Majromax• 1 year ago

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.

monkeyelite5• 1 year ago

That’s what I said.

throwaway203720• 1 year ago

First part: Yep, 100% agree.

Second part: Typical HN when discussing public markets. Zero evidence provided, except "my tin foil hat works".

nobodyandproud• 1 year ago

Janestreet and its graduates earned a reputation, and it’s not a flattering one.

monkeyelite5• 1 year ago

The second part follows logically.

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.

walterbell• 1 year ago

https://web.archive.org/web/20250519053752/https://www.bnnbl...

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.

brcmthrowaway• 1 year ago

This is interesting. Anyone know what they offered these traders? Can't be more than Zucks 100mn offer!

jxf• 1 year ago

Where did Meta offer them $100M?

esseph2• 1 year ago

He didn't actually offer anyone 100m, that was a bullshit number Altman made up.

lordnacho• 1 year ago

I'm amazed they managed to move firms. Suppose you know how the strategy works, and it's like what SEBI says.

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.

pgwhalen6• 1 year ago

A more straightforward explanation could be that the strategy is not market manipulation by conventional SEC thinking, and that this SEBI enforcement action is an unwelcome surprise rather than “damn they got us.”

mhh__3• 1 year ago

I could vaguely believe that you could hide some of the details by virtue of coming from a prop shop and saying it's some new angle for mlp.

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

CPLX2• 1 year ago

As always in finance the secret ingredient is crime.

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.

ldjkfkdsjnv2• 1 year ago

I know someone that made 10 million a year for a long time on wall street. They said, generally you can assume anyone making a large amount of money is a criminal. Any large deviations from the typical returns you would see in an asset class was suspicious

Ntrails• 1 year ago

I remain bemused that they described this as an "unintuitive strategy which required significant back testing etc".

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?

__s• 1 year ago

One thing to factor in is someone seeing you make this play & starting to buy up & sell high in morning shortly before you come in. So you need to factor in price points where you go through with this & where you don't

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

balderdash• 1 year ago

Having formerly worked for an NYSE Specialist firm the role of market making is incredibly important, 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. Candidly, the regulators are either too lazy, stupid, ill equipped or uninterested to do anything about it.

zeroCalories4• 1 year ago

Does it really matter? I've done nothing but buy and hold at reasonable prices, and market manipulation has never affected my trades. This seems like finance bros fucking finance bros, which is solidly in the "who cares" category of my life.

ycombinatrix2• 1 year ago

Our 401k & pensions are managed by "finance bros"

Fade_Dance4• 1 year ago

Trades on this scale move the big indexes, and everybody in the market is exposed to the passive investing ETF complex.

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.

anonu3• 1 year ago

That's sort of the very definition of arbitrage in today's modern markets - its not just the text book definition of "borrow money at a low interest rate and invest at a higher interest rate": there's latency arbs, regulatory arbs, microstructure arbs... They belong to the firms who can research and benefit from them before others figure it out.

RandomThoughts3• 1 year ago

its not just the text book definition of "borrow money at a low interest rate and invest at a higher interest rate"

That’s absolutely not the textbook definition of arbitrage.

Arbitrage is buy something somewhere at a price and resell it in a different market at a higher price. It’s just price arbitration hence the name.

There are no other kind of arbitrage implied when people talk about arbitrage. That’s what the word means.

state_less• 1 year ago

Who makes the markets in India? Is it the big Indian banks, or do these multinational trading firms act as market makers? If so, how do they distinguish between their trading and market making activities? It seems like it'd be relatively easy to rig a market (control the price) with enough capital and management over the trading.

sheepscreek• 1 year ago

SEBI’s bold move, at the expense of appearing unfriendly to foreign institutions, is commendable. I really hope that the SEC will wake up from its slumber and start investigating the tactics used by Citadel and its kind.

benced• 1 year ago

You can think “there should be a law” without endorsing the reckless and inconsistent ways that Indian regulatory agencies make up laws.

jterrys• 1 year ago

SEBI wasn't bold at all. They saw them do this in January, told them in February to stop, and they persisted until they finally shut the operation off. They were tipped off as early as November 2024 that this was happening. If anything SEBI was incredibly slow at reacting lol

gruez• 1 year ago

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?

thinkingtoilet• 1 year ago

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.

throwaway203720• 1 year ago

I hear this defence of NYSE specialists now and again. Why do other markets, including the NASDAQ, not require them? It makes little sense to me in 2025 where the vast majority of trading is electronic.

bjoli• 1 year ago

I wonder if things would be more tempered if you could, like in France, do a crime that is technically legal, but breaks the spirit of the law.

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.

throwaway314155• 1 year ago

News that portrays Jane Street in a negative light on HN? This should be good.

landl0rd2• 1 year ago

Extremely funny that Jane Street's "elite strategy" leaked and it's just banging the close lol

dmix• 1 year ago

They probably run every sort of strategy available in various markets. The indian one they probably played a much riskier hand thinking they could get away with it.

pclmulqdq6• 1 year ago

Tower got caught doing the same thing about 10 years ago. Apparently the strategy was literally called "the hammer" or something that was far too on-the-nose, but it was exploiting other strategies at the firm that bought a ton in the morning and hammered the close - "the hammer" made that leg profitable.

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).

alpark3• 1 year ago

You're thinking of Optiver's The Hammer, though every HFT firm has basically done or is doing something like this. [1]

Jane Street's version of this was absolutely intentional.

[1] https://www.reuters.com/article/business/high-frequency-trad...

cs7025• 1 year ago

According to Indian regulators, every trading day Jane Street would:

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.

stefan_• 1 year ago

Hardly a sophisticated high tech HFT operation. Totally illegal of course, except in places that maybe don't have the regulatory rigeur.

cs7025• 1 year ago

Hardly a sophisticated strategy, indeed, but Jane Street was earning like $1B/year of profit on it, according to https://news.ycombinator.com/item?id=44483691

naveen992• 1 year ago

Ok, but what moron was selling them the puts , and not seeing the pattern after a couple of days of this ? Sebi logic seems questionable.

lopatin• 1 year ago

Presumably retail options traders and less sophisticated firms

steveBK1234• 1 year ago

Retail

msgodel3• 1 year ago

Yeah that seems like it should push the premium higher. Even if it's some institution with very bad quantitative models eventually the careless put writers should run out of shares/capital to secure the puts with and get liquidated.

pclmulqdq6• 1 year ago

I assume the moron in question was using Black-Scholes or some similar formula to price those options, and refused to update their prior when they lost money day after day. This happens quite a bit in derivatives markets.

throwaway203720• 1 year ago

    > what moron

In India, it is clearly retail investors in the recent retail derivs boom.

dmurray2• 1 year ago

I think the point is that retail investors were selling the puts, they predictably sold every day (or more likely, they predictably bought calls which is almost equivalent), and there were no other sophisticated market makers in the market.

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.

StopDisinfo910• 1 year ago

People buy puts for coverage. It's not strictly a speculative tool.

Shocka13• 1 year ago

Have you considered that in US markets market makers sell the puts and simultaneously short approximate number of shares to hedge?

Horffupolde3• 1 year ago

So why can’t other players detect this behavior and trade with JS, removing their edge?

cwmoore• 1 year ago

Point taken, but maybe gov’s a player too?

steveBK1234• 1 year ago

The other firms compliance departments

posnet• 1 year ago

Most exchanges do not reveal counter-party information smaller than the broker level. So you wouldn't know just from looking at market activity the same person causing the large futures move was also taking large options positions.

Den_VR3• 1 year ago

Maybe, but given the reputation of Indian regulators I’m skeptical Jane Street’s only sin was the alleged market manipulation.

People may recall the matter involving Adani Group. https://hindenburgresearch.com/adani-update-sebi/

dyauspitr3• 1 year ago

Seems presumptive to slander an entire nations regulatory group on a single/couple of examples. By that metric the regulatory group in the US is completely bought out since they let 2008 happen.

conditionnumber• 1 year ago

Don't know about Jane Street, but that sounds like a general problem.

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.

ivape• 1 year ago

I have a suspicion this has been happening with a particular MAG7 stock these last few months, but I can't fully convince myself such a large stock can be manipulated like that.

throwaway203720• 1 year ago

    > If options & futures are more liquid than the underlying, someone will be tempted to nudge the underlying.

This is a weird statement. Why would liquidity matter here? As a point of reference there are generally two types of options: (1) options that depend directly upon the underlying, like a Tesla stock option, or (2) options that depend indirectly upon the underlying, like options on S&P 500 index futures. The liquidity in category 2 is normally tiny. Cat 1 normally has far less liquidity than 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.

theirjehdirhdij• 1 year ago

Unsurprising that unethical but "righteous" crooks like SBF and his pals came out of that place.

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".

futevolei2• 1 year ago

I’m not sure you are seeing it clearly..or have any trading experience whatsoever. They took substantial risk. There is always someone bigger so if they were wrong they could have been buried. Then they reversed. If there are allegations of insider trading or collusion or something else then I’m ready to pile on but I don’t see anything here.

tyre• 1 year ago

Both can be true:

- They were taking a substantial risk.

- They were manipulating the market.

throwaway203720• 1 year ago

    > However, given the scale of the operation, Jane Street's actions sure look like textbook market manipulation. Calling it like I see it.

I am unsure that the US SEC would agree with you. Buying and selling "a lot" is not clearly market manipulation in the US.

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!?

adw• 1 year ago

It’s legal gambling (same as the retail crypto and stock trades in the US). I’d expect that the legalisation of sports markets in the US has meaningfully moved exploitable punters out of the markets and into the bookmakers.

riffraff2• 1 year ago

Isn't the figure of retail losing money on daily trading similar in other markets?

I think eToro disclosed that on their app, people using CFDs were losing money 76% of the time.

joncrocks• 1 year ago

I think the SEC would say it's about intent. If your intent for buying/selling is to impact the price rather than buying/selling the asset in question, then you are trying to manipulate the market.

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.

dgfitz• 1 year ago

Jane Street called the bluff of that market. Occams razor.

olalonde3• 1 year ago

I never quite understood why market manipulation is illegal. If market participants make emotional or irrational decisions detached from fundamentals, it should be on them.

f33d51732• 1 year ago

While markets are used as a form of gambling, they also have a prosocial purpose, namely to allocate capital which improves the economy and society at large. Market manipulation increases market volatility and hence hurts efficient capital allocation, without some other benefit for the market. Besides that, it requires large amounts of capital to do, and hence can be effectively regulated.

sillysaurusx• 1 year ago

When I worked at Scotttrade in 2010, I vividly remember my coworker telling me that this is what they did with the money too. I remember being surprised to hear that it flowed out in the morning and flowed back in in the evening. I never understood why that would make sense till I read your comment here.

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.

hotep99• 1 year ago

I'm sure they're doing it domestically too, but due to the relative size of the markets and currency conversions what amounts to a serious disruption in the Indian stock market would just be background noise that gets ignored in a US market.

FajitaNachos• 1 year ago

I also worked at Scottrade in 2010 and I can assure you that Scottrade wasn't doing arbitrage or marking markets in this manner. I'm dubious of your coworker.

Workaccount22• 1 year ago

And this is what some of the brightest minds in the country are being harvested to develop. One of the biggest ongoing travesties.

Ozzie_osman• 1 year ago

Well that and increasing Daily Active Users and ad revenue on social media and video platforms.

noosphr• 1 year ago

Luckily, the majority of the brightest minds working on fundamental problems have recently been fired.

thierrydamiba• 1 year ago

Cash rules everything around me has been the slogan for this generation. Why wouldn’t they chase the biggest dollar?

fny• 1 year ago

Now consider crypto.

globular-toast• 1 year ago

Brightest minds in the world from what I can tell. They are particularly sickening in the way they specifically target certain demographics to come and leech for them.

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.

pas• 1 year ago

depends on how you define bright.

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.

geodel• 1 year ago

Exactly, they are just so bright they don't know anything about the world or what are they doing.

phendrenad2• 1 year ago

This seems like a play on "The best minds of my generation are thinking about how to make people click ads. That sucks." - Jeff Hammerbacher

But is it really? Is buying a lot of stock and selling it later really something that takes a genius?

Gathering6678• 1 year ago

My understanding is you need to be able to actually the market to be called market manipulation (e.g. pump-and-dump). If Jane Street alone can move the market in 1), it seems like the Indian stock market is not really liquid...

ExoticPearTree4• 1 year ago

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.

immibis2• 1 year ago

They didn't exploit a pricing pattern, they created one, which is market manipulation.

never_inline2• 1 year ago

Irony is jane street hires from prestigious Indian schools too, for pretty obscene salaries. These salaries get hyped and celebrated over newspapers.

never_inline2• 1 year ago

Irony is that jane street hires from prestigious Indian schools too, for pretty obscene salaries. These salaries get hyped and celebrated over newspapers.

seanhunter• 1 year ago

Seems pretty straightforward depending on what large means here. When I worked in an algorithmic execution business of a broker, we had to always cap our order size as a percentage of average trade size and also cap our participation so we couldn’t ever be more than a certain % of the total market volume. This was precisely so that we wouldn’t ever push the market in the way JS are accused of doing here.

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.

vovavili• 1 year ago

Isn't this just reasonably informed arbitrage?

Mo3• 1 year ago

Given the intraday patterns in the US and other stock markets I doubt this is limited to India

helsinkiandrew• 1 year ago

Bloombergs Matt Levine does a good analysis of this and comes to the conclusion that the example the SEBI gives looks a lot more like arbitrage than manipulation. They were selling zero day options to customers and hedging with the underlying stock, which reduced the cost of the options to customers (whilst making a ton of money).

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/...)

cs7025• 1 year ago

Thank you for sharing this. Levine is usually pretty accurate about this stuff. I've changed my mind. See my updated response here: https://news.ycombinator.com/item?id=44499330

cs7025• 1 year ago

EDIT:

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.

wfleming• 1 year ago

I look forward to the Matt Levine's section on this in tomorrow's Money Stuff.

kjetijor• 1 year ago

I'm very reminded of this Money Stuff: https://www.bloomberg.com/opinion/articles/2024-04-18/jane-s...

Probably unrelated, no mention of Millennium.

laserson• 1 year ago

https://www.bloomberg.com/opinion/newsletters/2025-07-07/jan...

miohtama2• 1 year ago

On Indian options markets

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-...

bwfan1236• 1 year ago

There were fools in size in that market, and they got fleeced. What were they doing ? If anything, JS was teaching them a lesson - and now, with this action, they will be bolder in their foolishness, and someone else will separate them from their money. Index options markets are not for the unsophisticated to play in except as a casino.

0xDEAFBEAD4• 1 year ago

How about some sort of tax on financial asset transactions?

SpicyLemonZest3• 1 year ago

India has one (https://en.wikipedia.org/wiki/Securities_Transaction_Tax). Retail investors don't choose to day trade options because of some rigorous financial analysis, so they aren't going to be discouraged by any feasible transaction tax rate.

ankit219• 1 year ago

India has had a history of market manipulation and stock market crashes. One specially high profile one was 1992 after which SEBI got it's powers.

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...

miohtama2• 1 year ago

I agree. Basically India's retail crazy drive on options directly go to the pockets of market makers or prop traders on the other side of the table.

Though usually short sell bans are not done to protect investors but companies, to protect companies from investors who might know something.

thedailymail• 1 year ago

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?)

markasoftware2• 1 year ago

"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". There may be some specific regulations about specific types of market manipulation that are more clearly defined, but oftentimes not. There's lots of grey area, because the definition of market manipulation makes it seem like any order that's canceled instead of executed might be market manipulation. But in fact a majority of orders do get canceled before they trade!

So the real difference between market manipulation and a canceled order is just intention, so regulators have to make judgment calls sometimes.

pgwhalen6• 1 year ago

"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.

Tadpole9181• 1 year ago

Honestly, there's a good case to be made that it doesn't matter. A government has every right to say "don't manipulate our market and try to fuck our economy" and not need to specify every tiny little loophole, especially to foreign companies. The fact that they must be reactive means they are always behind, and guarantees their country will be screwed and untold damage done before the problem can be addressed.

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".

throwaway203720• 1 year ago

    > A government has every right to say "don't manipulate our market and try to fuck our economy"

Friendly reminder: The stock market is not the economy.

throwaway203720• 1 year ago

In finance, regulation has two major flavours: prescriptive (specific) and "in spirit" (broad). US is mostly prescriptive, but the Howey test is a good example of "in spirit". Singapore is basically the inverse. Both can work well.

Zacharias030• 1 year ago

What is „market manipulation“ actually vs non-manipulative buying and selling to make a profit?

Fade_Dance4• 1 year ago

Take the example of spoofing. A trader puts in a 10mm order on the bid in futures, and then pulls it once price gets near him. He then develops an automated trading strategy that capitalizes on the volatility spike in the options market when this bid hits the tape.

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.

ysofunny• 1 year ago

What is „market manipulation“ actually vs non-manipulative buying and selling to make a profit?

directly proportional to the distance from the courts/judges/regulators

markasoftware2• 1 year ago

market manipulation is when you place/cancel an order with the intention that the market will react to you in a specific way, with no intention of that order actually executing.

yunwal• 1 year ago

That’s called spoofing and is a very small subset of market manipulation (which is when you manipulate the market).

neximo64• 1 year ago

Jane St HQ knew what it was presumably because of the action against Millenium. I would not have imagined Jane St doing something so ill

randall• 1 year ago

i knew anyone who loves ocaml that much couldn’t be trusted.

kragen2• 1 year ago

The article said:

While these actions were not a breach of any regulation,

I guess this is why you shouldn't do business in India: you can get retroactively punished for breaking rules the regulators wish they had made.

MichaelNolan• 1 year ago

Anyone have any recommendations for books/papers/articles (math heavy is fine) that give a good steel man argument for why options and derivatives are beneficial?

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?

msgodel3• 1 year ago

Puts let you hedge long positions, calls let you hedge short positions. Without that you'd have to liquidate much sooner so there would be more volatility.

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.)

PartiallyTyped3• 1 year ago

They allow for more flexible risk management (ie hedging), especially when dealing with margins or not very liquid tickers because they give you exposure to 100 units (%δ * 100) without requiring you to buy or sell them.

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.

throwaway203720• 1 year ago

As a start, separate "derivatives" (a huge category of products) into two simpler categories: listed options and futures. For many underlyings, like interest rates or commodities, it is very difficult to trade the underlying directly, so you use derivs to trade them indirectly.

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?

0xDEAFBEAD4• 1 year ago

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...

leoh2• 1 year ago

The idea that always felt at least tentatively compelling to me is that options prices themselves allow a way for people to express their sentiments about whether a security is under-priced or over-priced — while putting money on the line to do so.

throwaway203720• 1 year ago

Under-priced? Buy the stock. Over-priced? Long or short sell the stock. In your case, why do you need options? All are much lower risk than retail folks using options.

fooker• 1 year ago

Yes, this is the intuitive way to think about it.

It is wrong.

The insight that it’s wrong lead to an Economics Nobel price for the Black Scholes model for pricing options.

mhh__3• 1 year ago

In equities for example, an option at a given strike let's you pay a little for insurance i.e. that you will have X amount of cash if SPX is at Y and so on.

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.

pjc504• 1 year ago

It's helpful to remember the history of how they got here. Commodity producers (farms, oil) need to make investments before production, but want to reduce their exposure to changes in the spot price in the future. Hence futures: the ability to sell oil or onions six months in the future at an agreed price, rather than wait until the day to find out spot. This is genuinely valuable to them in terms of shifting risk to the finance industry in return for a price. It's like insurance.

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.

iamthemalto• 1 year ago

Helpful comment, but it's also mildly amusing you picked one of the few agricultural underlyings you can't trade futures on (Onion Futures Act). Not sure if that was intentional or not!

throwaway203720• 1 year ago

The blog from Financial Times has a much better write-up, including a link to the official 100+ page legal order from SEBI: "The details of Jane Street’s alleged ‘sinister scheme’ in India": https://www.ft.com/content/41c4789a-afa6-462c-a6ea-9704c2ba7...

pgwhalen6• 1 year ago

I do not have access to the FT, can you link directly to the document from SEBI?

leoh2• 1 year ago

SEBI doc: https://d1e00ek4ebabms.cloudfront.net/production/uploaded-fi...

Non-paywalled FT article: https://archive.is/2025.07.06-105811/https://www.ft.com/cont...

throwaway203720• 1 year ago

FT/A is free to sign-up.

bob1029• 1 year ago

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.

ivell• 1 year ago

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.

ExoticPearTree4• 1 year ago

without any plausible economic rationale

Since when making money is not an economic rationale?

brogdan• 1 year ago

As these other countries become more wealthy and lucrative in and of themselves due to the sheer industriousness of their citizenry rather than trying to “extract value” through shameless and country-destroying corruptive exploitation, we won’t have much of a reason to look up to places like Jane Street. I don’t particularly care what the interns have wrought because quite frankly the company is a parasitic entity that should not be looked up to as an example, but as something to immediately investigate as a nest of illegal activity that leaves the country worse off.

Am I surprised they were cut off? No, not at all. They should be cut off in the West altogether.

disposablese2• 1 year ago

I’d say that those claiming it’s a simple or classic strategy have very little idea of how stock exchanges operate in second and third-world countries. Getting permission to trade as a foreign institutional investor requires a significant amount of legal work and, umm, bureaucratic investment. Almost all stock exchanges out there use off-the-shelf trade surveillance software, which means the exchange will flag this, and so will the SEC-equivalents, on every trade they make. There’s also a proactive element to this in the form of writing reports and asking for explanations regarding the trades. There’s no way these trades happen without someone noticing.

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.

bwfan1236• 1 year ago

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.

disposablese2• 1 year ago

That’s such a STEM thing to say. In finance, this is considered a badge of honor.

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...

booleandilemma• 1 year ago

I wonder what kind of shady stuff they're doing in other markets.

nobodywillobsrv• 1 year ago

As someone in the industry, I have many times asked people how regulators actually track margin / levered exposure and it seems like they basically don't.

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.

zombot• 1 year ago

Nice to see that not all regulators have become toothless jokes like the SEC.

achow• 1 year ago

Understanding Jane Street

https://archive.is/czGds

mdnahas• 1 year ago

I was a quantitative trader for an options trading firm in the early 2010s. We were a very technical firms and hedges options trades within minutes. So, a trade with us would shift the stock price quickly. Even with that, we got scammed by traders doing this kind of thing on single stocks. My boss said that he complained to the broker and SEC, but nothing happened. We wrote code to limit our losses from this kind of scam.

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.

abhaynayar• 1 year ago

48.4 billion Indian rupees

I wonder who would be be able to grok this phrasing.

Either use crores, lacs, etc., or don't mention INR at all, and stick to USD.

Jane Street barred from Indian markets as regulator freezes $566M

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