What is Jane Street and how it made Rs 36,500 crore profit by gaming Dalal Street

Jane Street, a US-based quantitative trading firm, has made headlines for its extraordinary profits in India’s options market. Between January 2023 and March 2025, the firm reportedly earned a net profit of Rs 36,671 crore, primarily through trading in index options. This success has drawn scrutiny from India’s market regulator, the Securities and Exchange Board of India (SEBI), which is investigating allegations of market manipulation. This article explores who Jane Street is, how it achieved such massive profits, the strategies it employed, and the regulatory challenges it now faces.

Who is Jane Street?

Jane Street is a global quantitative trading firm headquartered in New York City. Founded in 2000, it specializes in algorithmic trading, using advanced mathematical models and technology to trade financial instruments like stocks, options, and futures. The firm entered India’s financial market in March 2020 and quickly established itself as a major player in the country’s derivatives market, which is the largest in the world by the number of contracts traded, according to a Bloomberg report (https://www.bloomberg.com/news/articles/2025-05-23/jane-street-earns-2-3-billion-riding-india-options-trading-wave).

Jane Street’s expertise lies in its ability to execute high-frequency trades with precision, leveraging data and algorithms to capitalize on market opportunities. In India, the firm focused on trading index options, particularly those tied to the Bank Nifty and Nifty indices, which are popular among traders due to their liquidity and volatility.

Jane Street’s Profits in India

Between January 2023 and March 2025, Jane Street generated significant profits in India’s options market. According to reports, the firm earned Rs 44,358 crore from options trading alone. However, after accounting for losses in other segments—Rs 7,208 crore in stock futures, Rs 191 crore in index futures, and Rs 288 crore in cash markets—the net profit stood at Rs 36,671 crore. In 2024 alone, Jane Street reportedly earned over $2.3 billion (approximately Rs 19,000 crore) in net revenue from equity derivatives in India, highlighting the country’s growing importance to the firm’s global operations (https://www.business-standard.com/markets/news/jane-street-nets-2-3-bn-from-booming-india-equity-options-trading-125052301072_1.html).

The firm’s success was driven by its strategic focus on India’s booming options market, which has seen an 11-fold surge in options premiums over the past five years, fueled by retail investor participation. Jane Street’s ability to execute large-scale trades with precision allowed it to capture a significant share of the market’s profits, reportedly accounting for 40% of the total index options profits during this period.

Trading Strategies Used by Jane Street

Jane Street’s profits were largely driven by three algorithmic trading strategies, particularly executed on expiry days for Bank Nifty and Nifty index options. These strategies, as outlined in SEBI’s interim report, involved coordinated buying and selling of underlying stocks, futures, and options to influence market prices. The strategies are detailed below:

Strategy 1: Morning Buy, Afternoon Sell

• Morning Activity: On the morning of expiry days, Jane Street would aggressively buy large quantities of Bank Nifty underlying stocks or futures while simultaneously selling Bank Nifty index options.

• Afternoon Activity: In the afternoon, the firm would sell these stocks or futures, leading to a softer close in the Bank Nifty index.

• Outcome: This strategy allowed Jane Street to profit from the price movements caused by their trades, as the softer close benefited their short positions in options.

Strategy 2: Late-Day Short Selling

• Late Trading Hours: In the last two hours of trading, Jane Street would sell large amounts of stocks, futures, or Bank Nifty futures and take short positions in Bank Nifty options.

• Outcome: The firm would benefit from a soft close in Bank Nifty options, as their selling pressure influenced the index’s closing price.

Strategy 3: Nifty Futures and Options

• Late Trading Hours: In the final two hours, Jane Street would buy large amounts of Nifty constituent futures and take long positions in Nifty index options at the close.

• Outcome: This strategy capitalized on price movements in the Nifty index, allowing the firm to profit from their long positions.

These strategies were executed with precision, leveraging Jane Street’s algorithmic trading capabilities to exploit market volatility and price reversals. According to SEBI, these tactics were particularly effective on expiry days, such as January 17, 2024, when the firm’s trading patterns were closely analyzed.

SEBI’s Investigation and Allegations

Jane Street’s massive profits drew attention from other market participants, who raised concerns about potential market manipulation. SEBI launched an investigation into the firm’s trading activities, focusing on its algorithmic strategies in the Bank Nifty and Nifty index options markets. The investigation covers Jane Street, its India unit (JSI Investments), and Jane Street Singapore, which are all active in India’s futures and options markets (https://www.reuters.com/sustainability/boards-policy-regulation/india-regulator-probes-jane-streets-derivative-trades-over-three-years-sources-2025-06-09/).

Key Findings from SEBI’s Interim Report

SEBI’s interim report, which analyzed Jane Street’s trading on 15 Bank Nifty expiry days, including January 17, 2024, revealed a pattern of aggressive buying and selling that allegedly misled other investors. The regulator claims that these strategies caused sharp reversals in index option prices, allowing Jane Street to profit from induced volatility. SEBI alleges that the firm made illegal profits of Rs 4,843 crore across 21 days through these practices.

Regulatory Actions

In response to these findings, SEBI has taken significant steps:

• Market Ban: SEBI has barred Jane Street and its related entities from buying, selling, or dealing in securities in the Indian market, either directly or indirectly (https://www.ndtvprofit.com/markets/sebi-bars-jane-street-group-from-indian-securities-market).

• Escrow Account: The regulator has directed Jane Street to deposit Rs 4,843 crore in alleged unlawful gains into an escrow account, with a lien in favor of SEBI and restrictions on bank debits.

• Ongoing Probe: SEBI is preparing a detailed report with assistance from the National Stock Exchange (NSE), after which Jane Street will receive a regulatory notice to explain its trades.

The investigation was prompted by complaints from at least nine institutional investors, who alleged that Jane Street’s strategies created an uneven playing field. A separate NSE investigation into Jane Street’s derivatives trades was closed after the firm’s India trading partner provided a response, but SEBI’s probe continues to focus on broader concerns about market integrity (https://www.financialexpress.com/market/sebi-probe-to-focus-on-jane-streets-index-options-strategies-3863172/).

Impact on India’s Options Market

Jane Street’s trading activities have highlighted both the opportunities and challenges in India’s derivatives market. The market has seen significant growth, with options premiums surging 11-fold in the five years to March 2025, driven by a retail investor-led boom. However, this growth has also exposed vulnerabilities, as retail investors have lost significant sums while foreign funds and proprietary firms, including Jane Street, have pocketed substantial profits. A SEBI study noted that proprietary traders and foreign portfolio investors made $7 billion in gross profits in the 12 months ended March 2024, while retail investors incurred equivalent losses (https://www.cnbc.com/2025/07/04/indian-regulator-bars-us-trading-firm-jane-street-from-accessing-securities-market.html).

The controversy surrounding Jane Street has sparked a broader debate about the role of algorithmic trading in India. Other global firms, such as Citadel Securities, Optiver, and Millennium, have also expanded their presence in India’s derivatives market, drawn by its size and liquidity. SEBI’s actions against Jane Street signal a commitment to maintaining market fairness and protecting retail investors from practices that could distort price discovery.

Table: Jane Street’s Financial Performance in India (Jan 2023–Mar 2025)

Broader Implications

The Jane Street case has significant implications for India’s financial markets:

• Regulatory Oversight: SEBI’s crackdown underscores the need for robust monitoring of algorithmic trading to prevent manipulation and ensure a level playing field.

• Market Integrity: The case highlights the challenges of balancing innovation in trading with the need to protect retail investors, who often lack the resources to compete with sophisticated firms.

• Foreign Investment: While foreign firms bring liquidity and expertise to India’s markets, their activities must align with local regulations to maintain trust and fairness.

Deven Choksey, founder of DRChoksey FinServ, emphasized that SEBI’s actions set a “good example” for maintaining market discipline, stating that price discovery should be universal for all traders (https://www.cnbc.com/2025/07/04/indian-regulator-bars-us-trading-firm-jane-street-from-accessing-securities-market.html).

Conclusion

Jane Street’s remarkable success in India’s options market, with net profits of Rs 36,671 crore between January 2023 and March 2025, showcases the potential of algorithmic trading in a rapidly growing market. However, the firm’s strategies have raised serious concerns about market manipulation, prompting SEBI to take decisive action. By barring Jane Street from the Indian securities market and requiring the deposit of alleged unlawful gains, SEBI is sending a strong message about the importance of market integrity.

As India’s derivatives market continues to grow, the outcome of this investigation could shape the future of algorithmic trading and foreign participation in the country. For now, the Jane Street case serves as a reminder of the delicate balance between innovation and regulation in one of the world’s most dynamic financial markets.

FAQs

1. What is Jane Street?
   Jane Street is a US-based quantitative trading firm specializing in algorithmic trading. It entered India’s financial market in March 2020 and focuses on trading index options.

2. How did Jane Street make profits in India?
   Jane Street earned Rs 36,671 crore in net profits by trading Bank Nifty and Nifty index options, using strategies that involved large buys and sells of stocks and futures on expiry days to influence option prices.

3. What are the allegations against Jane Street?
   SEBI alleges that Jane Street’s algorithmic trading strategies caused price reversals in index options, misleading other investors and resulting in illegal profits of Rs 4,843 crore over 21 days.

4. What actions has SEBI taken?
   SEBI has barred Jane Street from the Indian securities market and ordered the firm to deposit Rs 4,843 crore in alleged unlawful gains into an escrow account while the investigation continues.

5. What does this mean for India’s options market?
   The case highlights the need for stronger regulatory oversight to ensure fairness in India’s derivatives market, particularly as foreign firms increase their presence and retail investors face significant losses.