Preface: This case study gives readers a fast grounding in the key facts from SEBI’s interim order, then brings a fresh lens to the mechanics behind them. We break down the expiry‑day dynamics, option‑driven pressures, and trading patterns that can be challenging to interpret from the order itself. We wrap with where the case stands now and why its implications are already impacting regulatory action within and beyond India.
1. Key Findings of Initial Order
In July 2025, the Securities and Exchange Board of India (SEBI) issued an Interim Order in the matter of Index manipulation by Jane Street Group, alleging market manipulation in the Indian securities market. SEBI's nearly two-year analysis, covering the period January 2023 to March 2025, examined two coordinated strategies executed across the Nifty and Bank Nifty indices. A subset of the most profitable trading days were examined in detail, including an in-depth, minute-by-minute review of activity on the most profitable day, January 17th, 2024. High level summary of the two strategies described in the Order:
1. Intra-day Index Manipulation: Jane Street took large, long positions in underlying stocks and related stock futures during the morning trading session to drive up the index price, while simultaneously entering synthetic short positions in index options at more favourable pricing. In the afternoon, Jane Street aggressively reversed long positions, pushing the index price down to benefit their short positions.
2. Extended Marking the Close: Jane Street concentrated selling activity within the final hour of the trading day during option expiry, spreading orders to lower volume-weighted average prices (VWAP) used for settlement, thus benefitting their derivative book.
We identified the following key patterns across the set:
2.2 Options-led price formation
Short volatility is a common strategy in India, driven by structural market dynamics. Options are far more liquid than underlying indices – volumes are roughly 350 times higher than index futures (1) – making them attractive to retail investors seeking short-term leverage. This strong retail demand often inflates option premiums, creating opportunities for hedge funds to capture the volatility risk premium.
Given this, we tested whether changes in option generated delta were followed by movements in the index. Using short‑horizon regressions on the minute‑by‑minute dataset provided in SEBI’s appendix, we found that increases or decreases in option delta were typically followed by corresponding index moves within the next few minutes (often in the 1–5 minute range), whereas equivalent regressions using cash‑market or futures flows were weaker. This suggests that option flows can act as a leading indicator for index movements.
2.3 Expiry mechanics and basis
Another recurring theme in the SEBI data is the importance of the index basis on expiry days – the gap between the value implied by the underlying stocks and traded index future. Because India’s weekly options settle to a Volume Weighted Average Price (VWAP) of constituent stocks in the final 30 minutes, rather than the futures price, movements in cash or single stock futures (SSF) during this window can shift the official settlement level in ways not visible from the futures chart.
An example of this is May 8th, 2025. Our initial reconstruction suggested the day was loss-making, however, SEBI’s order showed a small gain. The difference stemmed from the basis: during the final 30 minutes, Jane Street bought roughly ₹50bn of SSF –around 30% of the window’s volume – which potentially pushed cash prices higher and widened the basis. As a result, the settlement finished above the futures close shown in the chart.
An analysis across all expiry days with Bank Nifty strategies showed the index basis almost always moved in Jane Street’s favor, with one exception. Despite heavy buying (₹100 billion in 35 minutes), the basis moved against them on June 19th, 2024.
2.4 Short-straddles and the “tractor-beam” effect
On short straddle days, we frequently saw the payoff peak not centred at the market open price but instead most profitable if the index moved in a certain direction. In the example below, as Jane Street was building their position on Dec 6th, 2024, they are constructing their peak (dark blue of contour lines), below the market open, contrary to a standard short volatility strategy where you would maximize time value if you sell options at-the-money.
Jane Street’s bearish straddle generated significant delta exposure, and our earlier regression showed that index futures tend to follow option delta traded. In effect, the way they structured the position may have exerted downward pressure on the market, pulling prices towards their optimal payoff zone. Given Jane Street’s size, this effect was magnified as participants hedged their own exposures – potentially creating a feedback loop that acted like a “tractor beam” towards Jane Street’s preferred level. Across the 12 short-straddle days, we observed a 100% correlation between payoff direction and subsequent index movement.
2.5 Intraday swings
Two days in the dataset stand out for the scale and speed of intraday position taking. Although the payoff profiles differ, they both exhibit large directional flows capable of materially moving the index.
3. Where the case is now and broader implications
Following the Interim Order, SEBI directed Jane Street to jointly and severally deposit ₹4,843.57 crore — identified as unlawful gains — into an escrow account. In compliance, Jane Street deposited the full amount on July 14, 2025. Soon after, SEBI announced that certain restrictions, including bans on trading, account freezes, and asset transfers, would cease to apply, provided there is ongoing compliance. In September 2025 Jane Street filed an appeal with the Securities Appellate Tribunal (SAT), alleging "bias and pre-determination" by SEBI, and accusing the regulator of allegedly "abandoning and reversing" an earlier finding that showed no price manipulation. The SAT adjourned the hearing in the case as of February 25, 2026, due to time constraints, meaning the Interim Order remains in abeyance.
It has also been reported that SEBI’s focus has broadened. While the Interim Order centred heavily on specific expiry day examples – particularly 17 January – subsequent reports indicate the wider review has increasingly examined the strategies underlying the activity, especially the repeated use of short‑straddles. In parallel, it has been reported that SEBI has been reassessing the interaction between aggressive cash‑market flows, option‑driven delta, and settlement mechanics such as basis widening in additional indices.
The case has also accelerated regulatory reforms within India. Exchanges have introduced real‑time Delta exposure monitoring to detect potential “pinning” behaviour near expiry; surveillance has shifted from simply flagging price spikes to analysing whether the same entity is simultaneously trading aggressively in cash markets while holding large option exposures. Algo‑governance rules have tightened as well, including stricter requirements for unique algo identifiers and exchange-level kill-switch mechanisms to halt risky algorithms.
These developments are partly a response to India’s own structural features – cash settled weekly options, heavy retail demand for short-dated leverage, and uneven liquidity across constituents – which together create fertile conditions for expiry window distortions. Regulators outside of India have also displayed heightened sensitivity to similar vulnerabilities. In China, authorities increased scrutiny of foreign ETF market making, and exchanges ordered the removal or relocation of certain co‑located HFT servers and introduced latency‑equalising measures. Singapore and the UAE, meanwhile, have advanced broader market‑integrity and data‑governance reforms, including tighter derivatives‑reporting and supervisory frameworks, reflecting a wider focus on cross‑market risks. The common concern is that settlement levels in one market can be influenced by price formation in another – a risk not unique to India. This broader context helps explain why the SEBI-Jane Street case has become not only a domestic enforcement matter but also a catalyst for renewed scrutiny of expiry‑day mechanics, cross‑market linkages, and derivatives‑driven price formation globally.