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S.Prusty
Thu, 10 Jul 2025 20:43:19 +0000
Market & Trade Insights

Inside the ₹36,000 Crore Market Manipulation That Shook Indian Markets

Why Was Jane Street Banned from Indian Markets? And Why Should You Care?

By now, you might have heard the buzz around Jane Street and its ban from Indian stock markets. So let’s break it down:
Who are they? Why were they banned? And why should this matter to you?

If you have a Demat account, chances are you’ve seen a pop-up warning like this:
“9 out of 10 traders in India lost money in F&O (Futures & Options) between FY22 and FY24, with an average loss of ₹50,000 per trader.”
Sounds scary? Well, there’s a reason we’re bringing this up.

There are two major parts of the stock market that people usually trade in:

1. Cash Market – where you actually buy and sell shares of companies.

2. Derivatives Market – where you don’t own the shares, but trade based on how the stock/index moves.

One common product in the derivatives market is Options. Here’s a quick and simple breakdown:

When you buy an option, you pay a small fee (called a premium) for the right to buy a stock later.

When you sell an option, you receive that premium, but you’re obligated to buy/sell if the buyer chooses to exercise the option.

The option premium includes two things: any profit you’d make right now, and some extra value for the time left till expiry.

As expiry day comes closer, the premium starts falling – and if the option is not valuable by then, it becomes worthless.

So why are we talking about all this?

Because this entire Jane Street issue happened due to heavy and clever trading in index options, a part of the derivatives market.

Let’s connect the dots.

The Rise of Retail Traders & Easy Access

After COVID, a lot of retail investors (everyday traders like you and me) entered the stock market.

Trading index options became easy: with just ₹15,000 to ₹80,000, you could take big positions.

Meanwhile, YouTube influencers made it sound like anyone can make money in trading – effortlessly.

That’s when Jane Street saw an opportunity.

Who Is Jane Street?

Jane Street is a US-based prop trading firm (they trade using their own money) known for quantitative trading and market-making.
They are big players, handling ETFs, stocks, bonds, and options across global markets. They’re also very smart with numbers, speed, and strategy.

What Did Jane Street Do?

In simple words, they used a strategy similar to “pump and dump.”
Here’s how it worked:

1. Morning Session: Jane Street started buying large quantities of top bank stocks (like HDFC Bank, ICICI, SBI) in the cash market. This made the Bank Nifty index go up.

2. Retail traders, seeing the market rise, started buying call options, hoping it would go higher.

3. Jane Street then quietly started selling calls (to retailers) and began buying put options (which go up when the market falls).

4. In the second half, they sold off all the shares they had bought in the morning. This made the market drop sharply.

5. The put options they bought became very profitable, while the call options bought by retailers expired worthless.

What Did SEBI Say?

SEBI (India’s market regulator) saw this as systematic manipulation—a strategy to trick the market and make profits unfairly.
Between January 2023 and March 2025, Jane Street reportedly made a whopping ₹36,502 crore in profits from Indian markets.
Their Foreign Portfolio Investors (FPIs) made ₹32,681 crore alone!

SEBI pointed out that these profits were way too high compared to the assets they held in India – suggesting they were making big money and taking it out fast.

One of the biggest single-day gains was ₹735 crore on January 17, 2024.

As a result, SEBI has ordered Jane Street to pay back ₹4,850 crore (around $560 million) – the largest such penalty ever in India’s market history.

Why This Matters

This isn’t just about punishing one company.
SEBI wants to send a strong message – big global firms can’t come in and take advantage of Indian markets and traders.
Whether you’re a small trader or a giant firm, rules are rules. And India is ready to enforce them.

Final Thoughts
If you’re someone who trades or is planning to start, remember this:
The stock market is not a shortcut to quick money. It rewards patience, knowledge, and discipline.

And as we’ve seen with Jane Street – no one, no matter how big or smart, is above the law.