[HN Gopher] Jane Street barred from Indian markets as regulator ...
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Jane Street barred from Indian markets as regulator freezes $566
million
Author : bwfan123
Score : 163 points
Date : 2025-07-06 14:03 UTC (8 hours ago)
(HTM) web link (www.cnbc.com)
(TXT) w3m dump (www.cnbc.com)
| bwfan123 wrote:
| 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
| steveBK123 wrote:
| 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.
| maest wrote:
| NIT: It's _marking_ the close. "Painting" has a different
| meaning.
| sokoloff wrote:
| 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_Dance wrote:
| 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.
| monkeyelite wrote:
| 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.
| alephnerd wrote:
| 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-...
| steveBK123 wrote:
| 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?
| alephnerd wrote:
| This behavior became common in the Indian market after the
| newer HFTs (Edit: hedge funds. Thanks for the callout
| avvt4avaw) in the Indian market like Millenium, Jane
| Street, Citadel, and others setup shop, and explains a LOT
| of the market weirdness that happened last year. DE Shaw
| India has been a much smarter player in Indian equities.
|
| Jane Street's kvetching about Millenium showed the
| spotlight and now everyone will be getting the hammer ("iss
| hamam mein sabh nange hain"). Jane Street was also dumb
| enough to do this during the General Election, so now
| Indian regulators have to do something. This plus the Adani
| prosecution is a quick win to restore confidence in SEBI.
| avvt4avaw wrote:
| This is a very weird use of terminology. None of Jane
| Street, Millennium or Citadel are High Frequency Traders
| (HFTs). Jane Street is a prop trading firm who engages in
| market making, but is not primarily known for HFT - they
| are grey box (i.e. human-in-the-loop) which on the
| spectrum of market making strategies, is pretty much the
| opposite end from HFTs. Other firms in this bracket
| include SIG and DRW.
|
| Millennium and Citadel are both hedge funds, who do not
| engage in market making at all. They are most similar to
| other multi-strategy hedge funds like Balyasny or
| Point72.
|
| You may be thinking of Citadel Securities, who are a
| market making firm and do engage in high frequency
| trading. Other large and well known HFT firms include
| Hudson River Trading, Tower Research, Jump Trading,
| Virtu, IMC and Optiver.
| anonu wrote:
| Didn't Jane Street sue Millenium first? I think the lesson of
| all this is - don't sue over your trading strategy secrets.
| alephnerd wrote:
| I think you might be right. It was such a juvenile and
| petty squabble.
|
| And on top of that - don't make such squabbles public
| during a GENERAL ELECTION, thus forcing politicans to
| cleanup shop.
|
| Same thing happened to Adani Group, as their scandal hit
| during the run up of the 2024 GE.
|
| Now both Adani Group and the HFT industry are under severe
| scrutiny due to the upcoming Bihar Elections, which is used
| a sandbox to test messaging by the opposition and
| incumbents in preparation of the next General Election and
| other state elections.
| monkeyelite wrote:
| 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.
| landl0rd wrote:
| Any pretense that does not give you disadvantages is
| misleading. Small shops and retail don't have to worry
| about e.g. slippage like the big guys do when taking
| positions. Big shops can work out custom instruments
| sometimes but on the other hand they also need them a lot
| more, as trying to pick up adequate hedging in derivatives
| mkts could wind up with yet more slippage. Etc.
| TacticalCoder wrote:
| Yup Jim Simons from the Renaissance hedge fund fame kept
| saying that: there are a shitload of (legal btw)
| strategies that do work with smallish amounts but they
| stop working once you get big.
| monkeyelite wrote:
| Yes, and so it's a misnomer when we talk about whether a
| big player is manipulating or not. They are.
| walterbell wrote:
| 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 wrote:
| This is interesting. Anyone know what they offered these
| traders? Can't be more than Zucks 100mn offer!
| lordnacho wrote:
| 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.
| CPLX wrote:
| 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.
| ldjkfkdsjnv wrote:
| 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
| balderdash wrote:
| 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.
| zeroCalories wrote:
| 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.
| ycombinatrix wrote:
| Our 401k & pensions are managed by "finance bros"
| sokoloff wrote:
| I hope mine is not managed by someone dumb enough to keep
| handing money over to Jane Street on such a simple scheme.
| If they are that dumb, I need to move my money way more
| than I need Jane Street punished.
| ycombinatrix wrote:
| Good luck moving "your" money out of a shared pension
| plan.
| sokoloff wrote:
| For a defined benefit plan, I don't need to care. For
| defined contribution plan, I care (but can usually choose
| investments). I personally only have 401k, IRA, and
| after-tax investments, no pension.
| zeroCalories wrote:
| My 401k is a well diversified portfolio of stocks and
| bonds, not a HFT or options trading playground.
| Fade_Dance wrote:
| 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.
| anonu wrote:
| 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.
| state_less wrote:
| 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 wrote:
| 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.
| gruez wrote:
| >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 wrote:
| >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.
| throwaway314155 wrote:
| News that portrays Jane Street in a negative light on HN? This
| should be good.
| landl0rd wrote:
| Extremely funny that Jane Street's "elite strategy" leaked and
| it's just banging the close lol
| dmix wrote:
| 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.
| pclmulqdq wrote:
| 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 wrote:
| 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...
| cs702 wrote:
| 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_ wrote:
| Hardly a sophisticated high tech HFT operation. Totally illegal
| of course, except in places that maybe don't have the
| regulatory rigeur.
| cs702 wrote:
| 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
| whatever1 wrote:
| Someone has to pay for the OCAML maintenance
| ldjkfkdsjnv wrote:
| all that OCAML we only hire the smartest is often a veil
| for what is really a simpler operation that is borderline
| illegal. probably alot of employees dont even really
| understand the systems they work on
| naveen99 wrote:
| 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 wrote:
| Presumably retail options traders and less sophisticated
| firms
| naveen99 wrote:
| Yeah, I think volatility in the indian market was way too
| low, and Jane street just juiced it. normally that would be
| a losing proposition, but too many existing players were
| short volatility habitually... answer is not to kick Jane
| street out, but to enjoy the taxes Jane street pays on the
| gains...
| lumost wrote:
| Low volatility is good for everyone engaged in long term
| asset management. Jane Street just found a way to make
| everyone else less money while making a small amount for
| themselves.
| MichaelZuo wrote:
| > Low volatility is good for everyone engaged in long
| term asset management.
|
| According to who?
|
| There are plenty of pension funds nowdays that have
| people specialized in picking up mid sized companies
| after big drops.
| mrcode007 wrote:
| it's a known effect. Without going into details here, you
| can calculate first crossing time of a barrier in a
| stochastic process and observe that often the first
| crossing time decreases as the volatility increases. From
| there you can set one barrier at 0 (default) and draw
| your own conclusion.
| steveBK123 wrote:
| Retail
| msgodel wrote:
| 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.
| pclmulqdq wrote:
| 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.
| isatty wrote:
| But why would they refuse to? They're there to make money
| too, after all.
| Horffupolde wrote:
| So why can't other players detect this behavior and trade with
| JS, removing their edge?
| cwmoore wrote:
| Point taken, but maybe gov's a player too?
| steveBK123 wrote:
| The other firms compliance departments
| Horffupolde wrote:
| The other firms are not manipulating the market. They are
| just riding along the manipulator.
| anticensor wrote:
| It is a crime to assist a crime.
| Horffupolde wrote:
| You are not assisting. If anything you are making it less
| profitable.
| posnet wrote:
| 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.
| londons_explore wrote:
| Doesn't matter - see a pattern, exploit it - and in doing
| so, make profit yourself whilst reducing the pattern.
| Den_VR wrote:
| 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/
| dyauspitr wrote:
| 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.
| sealeck wrote:
| There's a difference between "letting" something happen and
| actively doing something - it shows very different
| intentions. The events of 2008 were also caused by a
| cascading system failure involving lots of different
| components, which are hard for a single human to fully
| understand. The actions of the Indian regulator in the
| Adani case are much simpler, and their motivation is
| straightforward.
| dyauspitr wrote:
| One rotten regulator doesn't mean you get to view the
| entire Indian regulatory environment as unreliable
| though. It's the 4th/5th largest financial market in the
| world.
| Den_VR wrote:
| Is SEBI not the key regulator in this area?
|
| To say it plainly, SEBI has been exposed for their
| selective enforcement on high-profile entities. If Jane
| Street's in trouble with SEBI then it's only because they
| failed to secure the same privileges as Adani, or Karvy,
| or Ramkrishna, or Sapre, or Kamath.
| Den_VR wrote:
| Slander? Now there's a strong word.
|
| Examples of the 2023-2025 activities of the Indian
| securities regulator SEBI seem pretty relevant to current
| news involving SEBI here in 2025. Which is the topic of
| discussion. Whatever US regulators were doing in 2008 has
| nothing to do with this.
| CPLX wrote:
| > By that metric the regulatory group in the US is
| completely bought out since they let 2008 happen.
|
| Not sure that makes the point you think it makes.
| conditionnumber wrote:
| 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 wrote:
| 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.
| wfleming wrote:
| I look forward to the Matt Levine's section on this in tomorrow's
| Money Stuff.
| miohtama wrote:
| 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-...
| thedailymail wrote:
| >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?)
| markasoftware wrote:
| "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.
| Tadpole9181 wrote:
| 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".
| Zacharias030 wrote:
| What is ,,market manipulation" actually vs non-manipulative
| buying and selling to make a profit?
| Fade_Dance wrote:
| 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 wrote:
| > 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
| markasoftware wrote:
| 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.
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