1) buy large volumes of stocks and/or stock futures that are part of an index tracking India’s banking sector, early in the day,
2) subsequently place large options trades, betting that the index would decline or volatility would spike later in the day, and
3) later in the day, cash out of the large long positions, dragging the index lower, making far more money on the options trades than on the long positions.
Jane Street can and likely will claim the firm was only arbitraging away pricing inefficiencies, nothing more, nothing less. It was just business as usual, etc., etc.
However, given the scale of the operation, Jane Street's actions sure look like textbook market manipulation. Calling it like I see it.
If options & futures are more liquid than the underlying, someone will be tempted to nudge the underlying.
Bond ETFs and their options chains seem like another locale where this could happen.
> If options & futures are more liquid than the underlying, someone will be tempted to nudge the underlying.
Why is the adjective "more" important here? Even if less, the opportunity to profit is still good, assuming that one chooses the path of market manipulation.
> Coined in 2023, the group consists of Alphabet, Amazon, Apple, Meta Platforms, Microsoft, Nvidia, and Tesla.
Black-Scholes is just a customer-facing description of the option (i.e, it provides greeks that everyone can understand). But it isn't used as a starting point.
In practice, MM will back out what the implied volatility is from current prices. Then a stochastic volatility model is calibrated against that.
> what moron
According to who?
There are plenty of pension funds nowdays that have people specialized in picking up mid sized companies after big drops.
> However, given the scale of the operation, Jane Street's actions sure look like textbook market manipulation. Calling it like I see it.
Finally, in my view the India SEBI rules are insanely vague and are written to grant a lot of leeway to the regulator.
The real problem that no one is talking about: Why is India allowing its derivatives markets to explode? An estimated NINETY percent of retail derivs "investors" (I prefer the term "gamblers") lose money in India. Lots of these loses are gains for foreign banks and hedge funds. India: What the hell are you doing!?
- They were taking a substantial risk.
- They were manipulating the market.
People may recall the matter involving Adani Group. https://hindenburgresearch.com/adani-update-sebi/
> Seems presumptive to slander an entire nations regulatory group on a single/couple of examples.
To say it plainly, SEBI has been exposed for their selective enforcement on high-profile entities. If Jane Street’s in trouble with SEBI then it’s only because they failed to secure the same privileges as Adani, or Karvy, or Ramkrishna, or Sapre, or Kamath.
Examples of the 2023-2025 activities of the Indian securities regulator SEBI seem pretty relevant to current news involving SEBI here in 2025. Which is the topic of discussion. Whatever US regulators were doing in 2008 has nothing to do with this.
Not sure that makes the point you think it makes.
I imagine Jane Street will also justify this with some EA bullshit, or like Soros during the 97 crisis just say "someone would do it ; may as well me".
> Jane Street sued Millennium, Schadewald and Spottiswood in April [2024], claiming the two traders had taken an “immensely valuable” trading strategy with them. It later emerged at a court hearing that the strategy involved India options and had generated $1 billion in 2023 profits for Jane Street.
1) How do you approach mlp? They don't just give you an account, they have risk officers, compliance officers, and general strategy due diligence.
2) If you manage to get past it, what then? Say mlp just asks some superficial questions and sees the dollar signs. Are you going to do the same thing? You have to think the compliance people will complain, surely?
3) So maybe the strategy they actually approached with was a parasitical strategy? If you know which stocks will be bought and sold by JS, maybe you do jump in first? Especially as you'll know particulars like when it happens, which stocks are selected, and how to spot them.
I wonder to what degree the lawsuit is what got this on the radar of the Indian authorities. Maybe they should have listened to Stringer Bell.
> HFT style manipulation skimming money from everyone else in our markets
Which is fine, that's how the Indians prefer it. Not every place needs to be the same.
That’s absolutely not the textbook definition of arbitrage.
Arbitrage is buy something somewhere at a price and resell it in a different market at a higher price. It’s just price arbitration hence the name.
There are no other kind of arbitrage implied when people talk about arbitrage. That’s what the word means.
Can you expand on this?
Or it's their friends doing it and they're not uninterested, they're very interested in ensuring it continues.
Even if you are purely a stock picking buy and hold value investor, you will feel the reverberations. The modern market is deeply interconnected, and what Jane Street is doing here is literally moving the entire index volatility complex to pick up a modest billion a year. Let's say your small cap value stock issues some converts. A hair of that trading strategy will be embedded in the pricing model for the converts, and it will slightly change the cost of the debt for the company. Once you get out to 3rd 4th 5th order effects, it becomes a very faint influence, but when you consider that some of these market making/HFT trading practices at the core of the market are so deeply interlinked to just about everything that prints a price on a screen, it should be apparent that there is value in keeping the core areas of the market like the index volatility complex as clean as possible. Now weather Jane street's trading is just Irving price differences and improving the efficient market, or market manipulation, well that's another question, but the general rule of thumb is if you're using gigantic size to force bids and asks around, that's at high risk of being considered market manipulation that is toxic to market function.
> not a HFT or options trading playground
Do HFTs not trade stocks and bonds? Or options on them?
I assume Jane Street's version of this may have been unintentional: get your big position to do a bunch of intraday trading without worrying about being too short, then exit at the end of the day. This can work because markets tend to go up or stay flat intraday, meaning you get to use typical strategies in a jurisdiction that doesn't like when you go short via superposition. Then along the way, someone figured out this options trade and didn't realize their own behavior was influencing the price of the option (oops, I guess it wasn't superposition all along).
Jane Street's version of this was absolutely intentional.
[1] https://www.reuters.com/article/business/high-frequency-trad...
> India retail investors make up 35% of options trades. Institutions, seeking to hedge their risk or profit for their companies’ accounts, handle the rest. Regulators are alarmed that regular folk are bypassing the tried-and-true way to build wealth: buying and holding stocks and mutual funds.
> Instead they’re engaging in pure speculation. The average time an Indian trader holds an option is less than Instead they’re engaging in pure speculation. The average time an Indian trader holds an option is less than 30 minutes, according to data from mutual fund provider Axis Asset Management Co. “If you want to gamble, if you need diabetes and high blood pressure, then go into this market,” Ashwani Bhatia, a board member on the nation’s top stock market regulator, said last year.
https://economictimes.indiatimes.com/markets/options/indias-...
I don't get the basis for regulatory action if they weren't in "breach of any regulation." Not a fan of financial skullduggery, but it does seem important for government agencies to play by explicit, non-arbitrary rules. (Or maybe this article just got it wrong?)
So the real difference between market manipulation and a canceled order is just intention, so regulators have to make judgment calls sometimes.
There is absolutely zero illusion that Jane Street is acting in good faith. They know what they're doing is wrong.
After all the manipulation, all the crashes, all the exploitation - maybe it is appropriate to just say "I don't care if we wrote it down, we've had enough of this shit".
It’s just political. Who is allowed to manipulate and who pays their dues to be able to.
No, that's de riugeur for any large firm. You or I can buy a stock without changing the market, but if a bank or hedge fund wants to buy or sell millions of dollars of a stock they very much have to worry about execution. The price they receive for a trade will be worse than the market price, simply because the price will move once it's clear that someone is making a large block trade.
This is also why hedge funds worry about their 'alpha'. Even when they have found a good basis for a trade (e.g. an as-yet unexploited correlation), taking a position to profit on that trade moves prices in ways that eliminate that edge. That's the efficient market hypothesis in action.
The very odd thing here is the allegation that Jane Street could make perfectly ordinary market transactions in liquid securities and somehow have the market move with their net position. This is extremely unusual.
In this case it was Millenium ratting out on Jane Street (edit - other way around), but now the entire HFT (Edit: hedge funds. Thanks for the callout avvt4avaw) industry is under extreme scrutiny by SEBI as a result [0]
[0] - https://www.sebi.gov.in/enforcement/orders/jul-2025/interim-...
Jane Street's kvetching about Millenium showed the spotlight and now everyone will be getting the hammer ("iss hamam mein sabh nange hain"). Jane Street was also dumb enough to do this during the General Election, so now Indian regulators have to do something. This plus the Adani prosecution is a quick win to restore confidence in SEBI.
Millennium and Citadel are both hedge funds, who do not engage in market making at all. They are most similar to other multi-strategy hedge funds like Balyasny or Point72.
You may be thinking of Citadel Securities, who are a market making firm and do engage in high frequency trading. Other large and well known HFT firms include Hudson River Trading, Tower Research, Jump Trading, Virtu, IMC and Optiver.
And on top of that - don't make such squabbles public during a GENERAL ELECTION, thus forcing politicans to cleanup shop.
Same thing happened to Adani Group, as their scandal hit during the run up of the 2024 GE.
Now both Adani Group and the HFT industry are under severe scrutiny due to the upcoming Bihar Elections, which is used a sandbox to test messaging by the opposition and incumbents in preparation of the next General Election and other state elections.
> While these actions were not a breach of any regulation,
I guess this is why you shouldn't do business in India: you can get retroactively punished for breaking rules the regulators wish they had made.
I can wrap my head around why/how options for physical commodities give price stability for sellers and buyers. But at first glance I struggle to see how derivatives are beneficial in the equity markets. The argument is that derivatives increase market efficiency (more accurate pricing) over what just a simple buy/sell market would give you right? But how valuable is this increased efficiency? Obviously is super valuable to the people who work in finance, but how valuable is it outside of that context?
It's a source of easy leverage. Buying calls to make the underlying's price go up is easier than buying the underlying. Now you might ask a follow-up question: why is leverage beneficial in the first place.
It's also an easy way to get a loan that's almost at the risk-free rate (i.e. far better than banks) just by doing a box spread.
It's also a valuable measure of volatility by calculating the implied volatility. It could be for an individual stock or the market as a whole (VIX).
More abstractly derivatives let traders in one asset pay premia to offload risk to other traders who are more able to absorb it. This way everyone has what they want and the market functions more efficiently. It's very similar to insurance (and you can actually model insurance like a portfolio of long/short put+call options with a probabilistic (event dependent) multiplier.)
If you own stock, you can sell calls against it — especially if premium is high to hedge against drops. If you are short stock, you can buy calls to hedge against short term movement.
I personally don’t think they improve price discovery because market microstructure through options and mm exposure affect pricing.
Two strategies are detailed with trades: 1) expiry day price discrepancies between index options and underlying 2) expiry day painting the close
My “hedge” in this case is that I want to own the shares. (I’m short vs where I want to be.)
This example has two common characteristics of market manipulation - using size to push markets in a direction for personal benefit, and putting the bid in with sole intent to push the market, as in there was never any desire to see the order actually get filled.
If Jane Street was selling options that were only profitable within the context of a strategy that involved pushing massive size into the market near market close and forcing price down, that is likely categorized as manipulation. On the other hand, if they were moving inventory and in the process moved price, and they tweak their trading strategies to further profit from this, that's a more arguable position.
directly proportional to the distance from the courts/judges/regulators
But Jane Street? Running the most heinous of illegal operations. A clear example of manipulating India's markets. Ok, sure.
Edit: cannot reply below
Indian regulators won't settle with Adani Group. They have become a political liability due to how slapshot they played AND because the Bihar Elections are coming up, so skinning some goats (balli ka bakra) is a quick win - the RJD, INC, and TMC attacks on Modi+Adani are landing in Bihar and much of the rest of India.
Every Indian government does this - such as Kingfisher Group, Sahara Group, Gitanjali Group, etc.
Treat it the same way as Truong My Lan's case in Vietnam and Wanda Group's case in China.
[0] - https://www.reuters.com/sustainability/boards-policy-regulat...
[1] - https://www.reuters.com/sustainability/boards-policy-regulat...
> Adani, the nephew of Gautam Adani, was sent a notice by the Securities and Exchange Board of India (SEBI) last year which alleged he shared information about Adani Green's (ADNA.NS), 2021 acquisition of SoftBank-backed SB Energy Holdings with his brother-in-law before the deal was announced, according to a source and the document.
Some Adani relative is getting a slap on the wrist for a $100k insider trading violation. This has nothing to do with the main issues raised by Hindenburg.
Unlike corruption etc, rule of law really is best way to reward your favorites and punish your adversaries thoroughly.