Jane Street faces $570M seizure order and trading ban in India after options strategy exposed in court
Jul 8, 2025
Key Points
- India's SEBI issues $570 million seizure order and trading ban against Jane Street after the firm's $4.3 billion options arbitrage strategy surfaces in a trade secrets lawsuit.
- Jane Street exploited a 353-to-1 imbalance between options and underlying stock trading volumes in India by arbitraging price gaps, a strategy SEBI characterizes as market manipulation.
- The strategy's exposure came when traders who left Jane Street for Millennium triggered a lawsuit whose court filings revealed the exact mechanics to Indian regulators.
Summary
Jane Street's $4.3 billion arbitrage strategy in India's options market has triggered a trading ban and a $570 million seizure order from India's securities regulator SEBI.
The firm found an outsized opportunity in India's derivatives market, where options trading volume can exceed underlying stock trading by 353 to 1. Jane Street bought options while selling the underlying equities, or vice versa, to capture price gaps between inflated derivatives and underpriced stocks. The firm describes this as legitimate arbitrage. SEBI calls it market manipulation through coordinated moves in thinly traded stocks that support larger options positions, with Jane Street's derivative holdings reaching 7.3 times cash positions.
The strategy came to light through a lawsuit. Several traders who discovered the trade left Jane Street for Millennium. Jane Street sued Millennium for trade secret theft and kept the strategy redacted in its filings. During court proceedings, Millennium's lawyers disclosed the exact mechanism. Indian regulators spotted both firms attempting the same strategy and moved to shut it down.
India's options market created the opening both firms exploited. Retail traders are drawn to derivatives while the underlying cash market remains thin. Regulators were apparently unaware of the arbitrage until the lawsuit exposed it.