Mumbai, July 4 : In one of the biggest market manipulation cases India has witnessed in recent years, US-based trading firm Jane Street is under the scanner for allegedly using sophisticated strategies to rig Indian stock indices and pocket over Rs 43,000 crore in options profits.

According to the Securities and Exchange Board of India (SEBI), Jane Street and its related entities devised an elaborate intra-day trading strategy to artificially inflate and deflate the Bank Nifty index -- mainly on expiry days -- to gain from massive options positions.

The regulator found that between January 1, 2023, and March 31, 2025, Jane Street entities booked staggering profits of Rs 43,289 crore, largely from Bank Nifty options.

This was allegedly achieved by manipulating prices in the cash and futures market -- with precision, scale, and timing that pointed to deliberate intent.

According to SEBI, the strategy involved aggressive buying of Bank Nifty component stocks and futures during morning trading hours, which caused the index to rise.

As the day progressed, Jane Street would then aggressively sell those very positions, dragging the index down.

This timing was not random. The trades were deliberately made around monthly expiry dates -- when options contracts are settled based on the index's closing value -- allowing Jane Street to benefit massively from the swings they themselves created.

The regulator called this a classic case of 'marking-the-close' -- where a trader manipulates the underlying index prices just before expiry to favour their own derivatives positions.

On expiry days alone, they would enter the market with huge trades. For instance, on January 17, 2024, Jane Street bought Bank Nifty futures worth Rs 4,370 crore and sold options worth Rs 32,115 crore in the morning.

Later that day, they sold futures worth Rs 5,372 crore. While they faced intra-day losses in the cash and futures segment, their options profit stood at Rs 735 crore for the day -- showing how the manipulation was designed to benefit one segment while absorbing small losses in others.

SEBI's order highlighted that Jane Street was consistently running what appeared to be the largest index option risks in the Indian market, especially on expiry days.

The regulator further pointed out that other market participants, unaware of this behind-the-scenes manipulation, were misled by the artificially inflated or deflated index levels and ended up making decisions based on distorted prices.

As a result, SEBI has barred Jane Street and three of its related entities -- JSI2 Investments Private Ltd, Jane Street Singapore Pte. Ltd., and Jane Street Asia Trading Ltd -- from accessing the Indian securities market until further notice.

Their bank accounts have been frozen, and they have been directed to deposit Rs 4,843.5 crore as an initial measure of disgorgement.

SEBI has also instructed stock exchanges to closely monitor future activity by these entities to ensure they do not repeat such manipulation using similar trading patterns.

Jane Street, a global proprietary trading firm founded in 2000, is known for its deep involvement in ETF and options trading worldwide.

/IANS