Jane Street scandal wipes out 35% of index options premium turnover on NSE
market manipulation case
against US trading giant
Jane Street
has sent shockwaves through India's derivatives ecosystem, with
NSE index options
premium turnover plummeting by over a third as the world's largest derivatives exchange grapples with the absence of one of its biggest players.
On Thursday's weekly expiry,
NSE
options premium turnover stood at just Rs 39,625.77 crore on June 17, recording a 35% decline from June's average expiry day turnover of Rs 60,605 crore, exchange data revealed.
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Expiry day turnover has been in relentless decline this month: from Rs 61,511 crore on July 3 expiry, volumes crashed to Rs 45,884 crore last week before tumbling below the critical Rs 40,000 crore mark in the latest trading session.
Index options premium turnover serves as a key measure of real capital deployed and risk appetite, while Thursday's options expiry day traditionally represents the most active trading day of the week.
The crisis erupted after Sebi banned high-frequency trading behemoth Jane Street from Indian markets earlier this month in a market manipulation case that exposed the stunning scale of the firm's operations.
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Sebi's investigation revealed that Jane Street was "consistently running what appeared to be by far the largest risks in 'cash equivalent' terms in F&O, particularly on index option expiry days." The regulator's findings were damning: "what sets apart the trading pattern of the JS Group as prima facie being manipulative, is the intensity and sheer scale of their intervention in the underlying component stock and futures markets."
During the examination period, Jane Street raked in jaw-dropping profits of Rs 36,502.12 crore across all segments.
Last week, in a bid to return to the Indian markets, Jane Street deposited Rs 4,843.58 crore into an escrow account as it pleaded with Sebi to lift the trading ban. The American quant trading firm has requested that "following the creation of this escrow account in compliance with Sebi directions, certain conditional restrictions imposed under the interim order be lifted and that Sebi issue appropriate directions in this regard," according to Sebi's statement.
The regulator confirmed it is currently examining the request in accordance with the directions of the interim order, leaving the market in suspense about Jane Street's fate.
Sebi's probe revealed a sophisticated manipulation scheme where Jane Street allegedly used cash equities, stock futures, and index futures segments as tools to move prices, accepting losses in these segments to generate far larger profits in the options segment.
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