You’ve probably heard all of the buzz regarding the Jane Street scandal on news channels and social media, allegedly costing Indian retail investors a staggering ₹43,289 crore. This is not just only another financial headline that you see. It is a deep dive into just how an advanced global trading firm allegedly manipulated all of the Indian market, and this impacted countless small investors.

Who Is Jane Street and What Happened?

Jane Street first began as a big secretive proprietary trading firm located in New York. What is the meaning of “proprietary trading?” It simply means they trade in-house. Their money is used, not money from other people. Known for advanced algorithmic also high-frequency trading (HFT) strategies, they use computers in order to execute trades incredibly fast for tiny profits from so many transactions.

 Reportedly, Jane Street’s turnover exceeded $20 billion in 2023 alone, and this indicates they’re a financial powerhouse. The focus of the scandal is what Jane Street internally called their “India Strategy”. This wasn’t just a spur-of-the-moment idea, but instead an operation that was carefully planned, also spanning years, designed for observing how humans behaved, as well as how retail investors traded.

The Rise of Option Selling post Jane Street made India their Target

Indian retail traders noticeably surged in “option selling” after the COVID-19 pandemic. Option selling strategies seemed like an easy way to make money, so many online influencers, YouTube channels, and Telegram groups started to promote these strategies. The market had participation even from students having ₹1 lakh capital. They were selling options and this was the trend witnessed by Jane Street.

They came to an understanding that in order to gain huge profit in India, they would have to target such option sellers.  Their motive was to sabotage the stop losses of option sellers and cripple them and supposedly manipulate the Indian market.

How Jane Street’s ‘India Strategy’ worked?

 A Daily Cycle In 2020, Jane Street entered the Indian market and registered other two branches; one in in Hong Kong and another in Singapore, all of which had to be approved by SEBI (Securities and Exchange Board of India) in advance.

Many sources have claimed that they have made the extraordinary amount of profit worth  4 to 5 billion dollars from the options trading between 2023 and 2025 but not on regular purchase and sell stocks. This profit was obtained through the manipulation of the markets in expiry days of options which were mostly Thursdays.

How the scam was ultimately unmasked?

Millennium, a rival US hedge fund, poached a few employees from Jane Street in 2023. These workers were directly involved in the India Strategy. Having joined Millennium, these former Jane Street employees disclosed how Jane Street had booked 1 billion dollars in profits in the year 2023 alone. Millennium, being a competitor, brought Jane Street to court in the US on the grounds of them having been engaged in a case of misconduct and also illegal money making via market manipulation. The argument was that Jane Street was taking money of American citizens in the name of investments and and engaging in illegal practices.

The investigation at SEBI discovered frequent patterns that were in line with the accused manipulation. Consequently, SEBI published 117 page report of the findings. It subsequently barred Jane Street access to trade in India and froze their Indian accounts, which contained ₹48,000 crores of money.

The Ripple Effect: Who Else Got Affected?

 The Indian stock market was jolted by the news about the move of SEBI. Although the Nifty index was that affected but the derivatives market was experiencing large fluctuations and some companies indirectly or directly related to Jane Street suffered a big blow. The main broker who carried out the trades of Jane Street in India was Nuvama company, its stock, declined 11 per cent on the day news surfaced.  Angel One, BSE, and CDSL – three giant companies of Indian financial market who holds an important place, also experienced a decline in their stock price by 5-6%.

These were not as a direct participant in the scam but since the news destroyed its loyalty of shareholders on the Indian market. The investors were afraid that these incidences would result in tighter regulations, lower volumes and generally inefficient trading market. The market was already in fear and the whole system was penalized.

The lesson is a mandatory one, not only to all investors but also with a special mention to retail traders to learn from this scandal. When you think you notice something abnormal in terms of gains in any stock or trading position such as any stock doubling in 15 days or profit growing 150 times, your “antenna should go up”. Market manipulation or pump-and-dump schemes can usually be determined by these gains.

The bottom line is either the high publicity case such as Jane Street or the low-level player the retail investor turns out to be the loser.