SEBI ramped up Jane Street probe due to inadequate data, continued complaints, say sources

The Securities and Exchange Board of India (SEBI) launched a formal investigation into Jane Street’s trading practices even though its surveillance department had recommended otherwise due to continued complaints from market participants, two sources with direct knowledge of the matter said.

SEBI also believed inadequate data was used in the initial probe into the U.S. high-frequency trading firm, the people said, amid fears it might have “manipulated” the stock and bond markets.

The apex regulatory body on July 4 temporarily barred the firm from local markets on allegations of market manipulation, which the company has denied.

SEBI imposed a $567 million penalty on Jane Street, which the company has deposited. While it can restart trading in India, it has refrained from doing so, Reuters reported last month.

On Wednesday (September 3, 2025), Jane Street filed an appeal before the Securities Appellate Tribunal (SAT) against SEBI seeking documents and data which led to the formal inquiry.

The firm questioned why the regulator went against the advice of its own surveillance department that the inquiry against Jane Street should be closed and sought documents that supported the regulator’s change of stance.

The appeal, initially scheduled for Monday (September 8, 2025), will now be heard by the Tribunal on Tuesday (September 9, 2025) after a government change to the date of the Eid holiday.

Emails sent to SEBI and Jane Street seeking comments were not answered. The firm had earlier declined to comment on its appeal.

According to the two sources, SEBI’s top leadership was not satisfied with the robustness of the first examination concluded by its own surveillance department on December 11 and chose to initiate a formal investigation towards the end of December 2024, which gives it powers to seek data from the trading firm’s custodian bank and domestic trading partner.

A formal investigation is a quasi-legal process under Indian regulatory rules, in contrast to an internal enquiry.

According to Sumit Agrawal, a former SEBI official and founding partner of Regstreet Law Advisor, once a formal investigation is initiated any prior conclusions lose their weight, and the process begins anew.

“Earlier determinations, whether favourable or adverse, are set aside in favour of an independent investigation,” he said.

The regulator had also continued to receive complaints from market participants of manipulation of India’s key indexes, the two people said.

The firm in its appeal has sought copies of these complaints.

One such complaint was filed by UAE-based options trader Mayank Bansal on December 17, who told Reuters that “communication between a market participant and the regulator is premised on confidentiality”.

The department which oversees India’s market regulation later that month recommended opening an investigation to bring finality to the matter, the first source said.

SEBI tasked a new team with reviewing the firm’s trading activity over a much longer time frame than the trading data examined by its surveillance department. The data was also much more detailed, the two people said.

While the regulator continued the investigation, it issued a warning to the firm through Indian exchanges in February that it should refrain from taking large positions on days when derivatives contracts expire, according to the regulator’s 4 July order. Price volatility can often spike around those expirations.

But the firm’s trading performance on May 15 which earned it 3.7 billion rupees ($42.28 million), forced SEBI’s hand to pass an order, said the first source.

“SEBI officers worked overnight to finish its investigation in June, which ultimately led to passing the order,” the first person said.

($1 = 87.5060 Indian rupees).