SEBI’s recent crackdown on Jane Street, a major global trading firm, could spark sweeping changes in how global players operate in Indian markets. While the action targets one firm, the implications go much deeper—potentially challenging a strategy used by several high-frequency trading (HFT) giants.
For years, top global firms like Citadel, Jump Trading, IMC, and Jane Street have used what’s known as a “dual-entity” model. Under this setup, one arm is registered as a Foreign Portfolio Investor (FPI), and the other operates as a domestic Indian company. While these entities are technically separate, SEBI’s investigation found that they often function as a single unit—using sophisticated algorithms to coordinate trades between the two.For example, while FPIs enjoy lower taxes on derivatives, domestic firms can access intraday cash trades more freely. By syncing both arms, global firms could move quickly between markets—often trading with themselves to capture tiny price differences.
But SEBI has flagged this behaviour as potentially manipulative. In Jane Street’s case, it said such trades lacked genuine market intent and distorted price discovery. The regulator believes this model may violate the principle of “arms-length” separation between entities and could give certain players an unfair advantage over others, especially retail investors.
“More importantly, this isn’t likely to remain a one-off enforcement. Industry insiders say SEBI is now reviewing how widespread the dual-entity model is, and whether other firms are also using similar strategies” sources in the know said. If deeper regulatory action follows, it could lead to a fundamental rethink of how global capital participates in India’s equity and derivatives markets.
Several firms are now reviewing their India setups, and some may even scale back operations temporarily. Market experts also warn of potential short-term impacts on liquidity, especially in derivatives, where global HFT firms have been key participants.

Jane Street vs SEBI: Algorithmic Trading Faces Its Big Test

Sustained SEBI probe puts global quant firms on notice; tribunal battle may shape future of market surveillance. If Jane Street challenges SEBI’s findings before the Securities Appellate Tribunal (SAT), the regulator’s conclusions will face intense judicial scrutiny. At the core lies a critical question: did the firm’s high-frequency strategies create artificial hedging opportunities and distort genuine market behaviour? The outcome could redefine how “manipulative intent” is viewed in the algorithmic trading era.

SEBI’s timeline, detailed by Chairperson Madhabi Puri Buch, shows a probe launched in April 2024, policy interventions in October and a cease-and-desist directive via NSE in February 2025. “Against this backdrop, claims of regulatory inaction are both factually and procedurally untenable,” says Ketan Mukhija, Senior Partner, Burgeon Law. The matter now moves to adjudication, potential settlement under the 2018 Regulations, or appellate review before SAT or the High Court—depending on Jane Street’s next move.

The regulator has widened its lens to include other global quant and high-frequency firms operating in India, signalling a systemic crackdown. “The focus is shifting from writing new rules to strengthening surveillance and enforcement,” says an expert. With algorithmic trading’s dominance and minimal human intervention, expect sharper AI-driven monitoring and deeper engagement with market infrastructure to tackle sophisticated manipulative strategies.

“This is a stress test of India’s market oversight framework and a reminder of the need for regulatory agility in an increasingly automated ecosystem,” notes Akshaya Bhansali, Partner, Mindspright Legal.

Strong Case, But Procedural Hurdles Ahead

Jane Street may approach SAT but getting full relief will be dicey given the volume of evidence against Jane Street and public interest involved. The Tribunal may grant unfreezing limited funds but overturning the entire order is unlikely. In the event the Tribunal dismisses the claim, the matter could go to the Supreme Court, but unless SEBI’s process is flawed or law misapplied, SC intervention would be limited.

While Jane Street is likely to challenge the interim, ex-parte order before the Securities Appellate Tribunal (SAT), securing full relief may prove difficult. The Tribunal could allow limited access to frozen funds but overturning the entire order is unlikely. If SAT rules against the firm, escalation to the Supreme Court is foreseeable—though unless SEBI’s process is flawed or the law misapplied, SC intervention would likely be limited.

“SEBI’s invocation of interim powers without granting a pre-decisional hearing to a foreign institutional player with significant standing and regulatory oversight in its home jurisdiction. This could be viewed as a procedural infirmity, particularly since SEBI’s own order admits that investigations are still ongoing and the findings are prima facie in nature,” said Alay Razvi, Managing Partner, Accord Juris.

A Wake-Up Call for Market Safeguards

This episode has exposed critical vulnerabilities in India’s market microstructure. Jane Street’s ability to generate massive profits within seconds of index rebalancing demonstrates how predictable institutional flows—such as ETFs and passive funds—can be front-run through latency arbitrage and event-driven strategies.

“A critical issue is whether India’s current regulatory framework—including its Market Integrity Framework and AI/ML governance guidelines—adequately addresses the risks posed by event-based predatory trading. This serves as a wake-up call for SEBI to recalibrate its approach towards predictive algo trading, information symmetry, and event safeguarding protocols during passive flows and index adjustments,” said Kunal Sharma, Founder & Managing Partner, Taraksh Lawyers & Consultants.