The Jane Street–SEBI case is often discussed as a product of features specific to the Indian market, including the high trading volumes in weekly index options vs. underlying cash products, high retail participation, and settlement mechanics that link option payoffs directly to prices in the underlying cash markets. Viewed more broadly, however, the case highlights a recurring structural vulnerability that extends well beyond India. Where large derivatives or benchmark exposures settle off prices formed in a different market – particularly one that is thinner, less transparent, or temporarily illiquid – even relatively small, well‑timed trades can exert disproportionate influence over outcomes. In response to significant enforcement actions, regulators and firms routinely conduct read‑across exercises, asking where similar dynamics may exist elsewhere, even if the instruments, venues, or participants differ. This discussion adopts that same perspective, using the Jane Street–SEBI case as a reference point to examine several examples of other markets where common enabling conditions occur.
Example 1: US Equities
By 2024, over half of U.S. equity trading occurred off‑exchange, with Europe showing a similar trend as lit order books represented only about 27% of trading in late 2025. This migration of activity leads to two main challenges:
In this environment, participants with greater visibility into off‑venue flows – such as internalizers or block trading desks – may anticipate pressure on displayed prices and position ahead of it, making it increasingly difficult to distinguish legitimate trading from intentional price influence. This dynamic coincides with the scale of linked products, with ETFs now accounting for roughly one‑third of equity trading and derivatives activity representing close to 40% of overall financial‑market activity, even as price formation remains anchored in increasingly fragmented cash markets.
This divergence has drawn regulatory attention in recent years, including the SEC taking steps to try to push more activity back on exchange through new rules and market structure changes. Focusing a read across solely on structural differences between U.S. and Indian market design risks missing the point: similar vulnerabilities can exist even where liquidity imbalances are intermittent rather than persistent.
Example 2: 0DTE Options
Another major evolution in U.S. market structure is the rapid growth of zero‑day‑to‑expiration (0DTE) options. Since the introduction of daily expirations, trading in these contracts has expanded sharply and now accounts for roughly 60% of S&P 500 options volume. As with weekly index options in India, participation in short‑dated U.S. options is heavily retail‑driven, reflecting the ability to obtain short‑term leverage at relatively low cost.
In the Jane Street–SEBI case, much of the exposure was concentrated in short straddles, which benefit when the underlying settles near a specific strike. A closely related structure that has become prevalent in short‑dated U.S. options trading is the iron condor, particularly among retail participants. While the payoff profile differs, the economic logic is similar: profitability depends on keeping prices within a relatively narrow range over a short horizon.
Recent UBS analysis has suggested that the rapid growth of ultra-short-dated option selling strategies, particularly 0DTE iron condors, is increasingly acting as a mechanical brake on equity rebounds. As these positions cluster risk around narrow price ranges, dealer hedging on the other side tends to be most active as the index approaches the upper call strikes, especially late in the trading session. The resulting flows – driven by routine hedging rather than intent –can dampen upward momentum and leave a visible imprint on both S&P 500 options positioning and intraday index behavior. The relevance of this example is not to suggest that such activity is improper, but to highlight the conditions it creates.
That vulnerability is not confined to the most liquid equity indices. CBOE lists weekly options on more than 100 ETFs and ETNs, as well as on 11 equity indices, many of which are materially less liquid than the S&P 500, such as products linked to small-cap benchmarks such as the Russell 2000.
Example 3: VIX
The VIX provides a related example, arising not from short-dated trading, but from how settlement prices are determined. Under normal conditions, the VIX index is calculated continuously using out-of‑the‑money S&P 500 options with maturities spanning roughly 23 to 37 days. This rolling methodology smooths the measure across nearby expiries, reducing reliance on liquidity at any single maturity and allowing the index to evolve gradually as contracts roll forward.
VIX derivatives, however, do not settle to this continuous measure. Instead, VIX futures and options settle to a single, time-boxed event – the Special Opening Quotation (SOQ). On settlement day, the rolling calculation collapses into a point-in‑time fixing, determined during the pre‑open auction using only those S&P 500 options with exactly 30 days remaining to maturity. Prices formed in this brief window are then mechanically used to determine final settlement. While this design aligns contract maturity cleanly with the underlying index, it also concentrates settlement sensitivity into a narrow set of options traded during a short pre‑open window.
The result is a combination of concentration and informational asymmetry. Many participants – particularly retail traders – engage with VIX-linked products as a general “fear gauge” without fully appreciating that final settlement depends on prices formed during a narrow auction in specific SPX options. Participants who understand these mechanics, by contrast, can focus their attention precisely on the instruments and timing that matter most for settlement.
These dynamics are examined in “Manipulation in the VIX?” by John Griffin and Amin Shams. Rather than challenging the conceptual design of the VIX, the authors analyze trading patterns around settlement and document unusually high volumes in the specific out-of‑the‑money SPX options used in the SOQ, despite those options still having 30 days remaining until expiry. This behavior is atypical, as options activity normally intensifies closer to expiration, not a month in advance. At the same time, in‑the‑money options that did not contribute to settlement showed little corresponding activity.
Presented hypothetically, a trader with a pre-existing position in VIX derivatives could benefit from submitting aggressive orders in the relevant SPX options during the SOQ window, influencing clearing prices and, in turn, the final settlement level. Even small price movements in these inputs can translate directly into gains or losses on settled VIX positions.
Importantly, while there have been allegations and legal challenges related to VIX settlement mechanics, no enforcement actions have established misconduct. As with the other examples discussed, the significance lies not in proven abuse, but in the structure itself. When large derivative exposures settle mechanically off prices formed in a narrow, time-boxed process, familiar enabling conditions reappear: concentrated sensitivity, uneven understanding of the mechanics, and settlement windows in which trading activity can have outsized effects.
Similar dynamics have appeared in traditional benchmark markets. The ISDAFIX cases showed that even transaction-based benchmarks can become vulnerable when settlement incentives concentrate trading into narrow windows: although ISDAFIX was calculated from observable swap transactions rather than dealer submissions, regulators found that traders with derivatives positions executed targeted trades around the fixing time to influence the published rate. That experience underscores a broader lesson that applies equally here — grounding settlement in real transactions does not eliminate risk if price formation is concentrated into brief, predictable intervals.
Example 4: Crypto
The Mango Markets case illustrates how the same structural vulnerability can emerge in decentralized markets when leveraged derivatives settle off prices formed elsewhere. It was one of the first major crypto enforcement actions brought jointly by the U.S. Department of Justice, the CFTC, and the SEC, and it introduced a new term into the market‑surveillance lexicon: oracle manipulation.
Mango Markets operated a decentralized exchange offering spot trading, lending, and perpetual derivatives, including swaps referencing the price of its native token, MNGO, against USDC. Rather than settling these contracts using prices formed on the platform itself, Mango relied on
an “oracle” that calculated reference prices as a weighted average across three external exchanges. In principle, this design reduced reliance on any single venue. In practice, it introduced a critical dependency on markets in which MNGO traded with very limited liquidity.
That dependency proved exploitable. After establishing large offsetting long and short positions in MNGO-USDC perpetual swaps, trader Avraham Eisenberg aggressively purchased MNGO on the oracle reference venues over a short period, driving prices more than ten-fold higher. Because the oracle mechanically incorporated those prices, the marked value of his long derivative position increased sharply, even though the underlying liquidity supporting that price move was minimal.
The inflated valuation was then treated as collateral by the protocol, enabling Eisenberg to borrow and withdraw over $110 million in digital assets and effectively drain Mango’s liquidity. Once the assets were withdrawn, the price of MNGO reverted, leaving the platform with substantial losses. Subsequent negotiations to return a portion of the funds in exchange for a commitment not to pursue legal action were cited by the Department of Justice as evidence of intent.
Stripped of its crypto-specific terminology, the mechanics are familiar. A leveraged position settled off a derived price. That price was formed in a thinner market during a short window. Modest trading activity in the reference venues had an outsized impact on valuation and settlement outcomes. In traditional markets, this would be described as manipulating the inputs to a benchmark or settlement mechanism.
Conclusion:
Taken together, these examples suggest that the core risk highlighted by the Jane Street–SEBI case is neither novel nor confined to a particular asset class. Rather, it reflects a recurring structural vulnerability that emerges whenever large, cash-settled derivatives reference prices formed in thinner, more opaque, or time-constrained markets. For firms responsible for market surveillance and risk management, the appropriate response is not to label entire products as inherently problematic, but to identify where enabling conditions converge. Markets featuring short-dated expiries, concentrated positioning, fragmented liquidity, and mechanically determined settlement prices warrant heightened scrutiny – particularly where participants have the scale, access, or informational advantages necessary to exploit them.
