Background
On July 4, 2025, the Securities Exchange Board of India (SEBI) accused Jane Street Group LLC – a globally recognized proprietary trading firm – of manipulating the Bank Nifty index, one of India’s most heavily traded financial instruments.
According to SEBI, Jane Street artificially inflated the BANKNIFTY index during the morning session by aggressively buying large quantities of index constituent stocks and futures. Concurrently, they built significant short derivative positions by purchasing BANKNIFTY puts and selling BANKNIFTY calls, anticipating a reversal. In the afternoon, the firm unwound its long positions, triggering a sharp index decline and generating profit from their short options exposure. SEBI labeled the tactic as deliberate market manipulation, not legitimate arbitrage.
The Jane Street Strategy in Action
SEBI’s analysis of past expiry days, such as January 17, 2024, revealed a clear pattern:
- Morning Session: Jane Street acquired ₹4,370 crores of BANKNIFTY stocks and futures, driving the index upward.
- Simultaneously: The firm net sold ₹32,114 crores in index options (buying puts and selling calls), creating a substantial short position.
- Afternoon Session: Jane Street reversed its trades, offloading ₹5,372 crores in stocks and futures, pressuring prices downward.
- Outcome: This intraday strategy yielded ₹734 crores in net profit – primarily from BANKNIFTY index options.
A Grey Area in the Disclosure Framework?
Jane Street’s actions expose challenges of capturing derivative exposure in India’s shareholding disclosure framework, especially for derivative-based strategies that don’t result in end-of-day ownership – and thus escape disclosure triggers.
India’s SAST (Substantial Acquisition of Shares and Takeovers) regulations are designed to capture:
- Shareholdings at end-of-day
- Holdings of 5% or more voting rights or shares
- Physically settled derivatives only – not cash-settled instruments
Because Jane Street exited all positions intraday and used cash-settled derivatives, no disclosure requirement was triggered.
Global Blind Spots in Derivative Disclosure
This incident highlights a broader global challenge:
“How can regulators ensure transparency when derivative positions exert market influence but don’t confer direct ownership?”
In jurisdictions like India, Australia, and Japan, economic interest via cash-settled derivatives is not aggregated, allowing impactful positions to go unreported. By contrast, frameworks in the EU and UK require investors to disclose derivative-based exposures – even when settled in cash – once thresholds are crossed.
Recent Global Developments in Disclosure Rules
Regulators worldwide are responding to this transparency gap:
| Jurisdiction | Update |
|---|---|
| United States (SEC Rule 13D/G) | Effective Sep 30, 2024: Investors must count certain cash-settled derivatives in beneficial ownership filings. |
| Australia | Proposed changes will include cash-settled derivatives in substantial shareholding calculations. |
| Japan | Effective May 1, 2026: Investors will report large positions including cash-settled instruments. |
The trend is clear: derivatives aggregation is becoming standard in major shareholding disclosure rules.
Intraday vs. End-of-Day Disclosure Thresholds
Most global disclosure regimes rely on end-of-day holdings, but this can obscure critical intraday activity:
“Large intraday trades that influence market pricing or control can breach thresholds temporarily – yet remain undisclosed.”
Some forward-thinking jurisdictions now mandate daily trading activity disclosures after a threshold breach:
- UK (Takeover Code Rule 8.3): Investors crossing 1% in offeror/offeree must disclose daily trades during a takeover period.
- Japan: Investors breaching 5% must report transactions from the past 60 days.
- Australia: Daily trades are reportable from initial disclosure until material position movement.
Conclusion
Jane Street’s strategy didn’t breach Indian SAST thresholds. However, SEBI’s concerns highlight the growing complexity of monitoring market behavior – especially when derivatives, intraday strategies, and cross-border rules converge.
The case reinforces a pressing need for stronger global standards and automated compliance solutions.
Take Control of Your Disclosure Risk with Funds-Axis
Navigating global shareholding disclosure regimes is more complex than ever. From derivative exposures and intraday trades to multi-jurisdictional rules and reporting thresholds – the risk is real, and the penalties are steep.
At Funds-Axis, our automated HighWire system empowers firms to:
- Monitor country-specific thresholds in real time
- Track derivative positions and ownership triggers
- Generate timely disclosure alerts and filings
- Stay ahead of regulatory changes worldwide
Discover our Shareholding Disclosure Monitoring Software or request a tailored demo to see how HighWire can transform your compliance strategy.
Let us simplify the complexity – before it becomes a problem.
