Jane Street Crackdown: Zerodha’s Nithin Kamath Warns of Risks to Brokers and Stock Exchanges

India's market regulator SEBI has taken strong action against global trading firm Jane Street, accusing it of manipulating the market. This move has caused a stir in India's derivatives market. While, the firm and its Indian arm JSI Investment have been banned from trading in Indian markets.

"You've got to hand it to SEBI for going after Jane Street. If the allegations are true, it's blatant market manipulation." Zerodha's co-founder, Nithin Kamath, praised SEBI's strong action but warned of risks that could follow in a post on X.

SEBI's Ban On Jane Street:

SEBI's interim order says that Jane Street manipulated prices using cash, futures, and options trades, especially on expiry days buying and selling in a way that gave them an unfair advantage-and made illegal profits of around Rs 4,843 crore.

SEBI has frozen all their accounts in India and ordered them to deposit the illegal gains into a special account. They also can't sell or move any assets in India for now.

Jane Street is also barred from selling or transferring any assets in India until the required amount is deposited. The firm has 21 days to respond to the order and can ask for a personal hearing
What shocked Kamath, was that Jane Street continued these trades even after getting warnings from stock exchanges.

"The shocking part? They kept at it even after receiving warnings from the exchanges. Maybe this is what happens when you're used to the lenient US regulatory regime," Nithin Kamath mentioned in his post on the social media Platfrm X.

Kamath found it shocking that Jane Street continued with these actions even after warnings from stock exchanges. He suggested this might be because Jane Street is used to the more relaxed rules in the U.S., where similar practices are common but not allowed in India.

Why This Ban Could Hurt the Market?

"Trading firms like Jane Street are a big part of the Indian options market, accounting for nearly 50% of trading volume. If such firms stop trading, there could be less liquidity in the market, meaning wider price gaps, more volatility, and fewer trades. This could hurt retail investors (who make up about 35% of the market) and negatively affect brokers and exchanges too," said Nithin Kamath in X post.

"So this could be bad news for both exchanges and brokers," he added.

Kamath believes the coming days will reveal just how dependent India's markets are on large prop firms like Jane Street.

Jane Street's Response:

SEBI said that, Jane Street has 21 days to respond and can ask for a hearing. Until then, they are banned from trading in Indian markets.

In a statement, Jane Street said they follow the rules in every country they operate and disagree with SEBI's findings.

"Jane Street is committed to operating in compliance with all regulations in the regions we operate around the world. Jane Street disputes the findings of the SEBI interim order and will further engage with the regulator."