Latest news with #MayankBansal
Time of India
29-07-2025
- Business
- Time of India
Jane St: How an options trader smelt a rat when others raised a toast
There is nothing more secretive in the modern era than the world of hedge funds. Some of them have protocols that would put spy agencies of states to shame. When the gigantic market manipulation of one such fund had to be uncovered, it was possible only for someone who is as secretive about his own venture. Meet Mayank Bansal, 37, the derivatives trader who first came out publicly about manipulation in the Indian derivatives market when much of
Economic Times
29-07-2025
- Business
- Economic Times
Jane St: How an options trader smelt a rat when others raised a toast
There is nothing more secretive in the modern era than the world of hedge funds. Some of them have protocols that would put spy agencies of states to shame. When the gigantic market manipulation of one such fund had to be uncovered, it was possible only for someone who is as secretive about his own venture. Meet Mayank Bansal, 37, the derivatives trader who first came out publicly about manipulation in the Indian derivatives market when much of
Al Jazeera
18-07-2025
- Business
- Al Jazeera
India's ban on Jane Street raises concerns over regulator role
Indian tax authorities and market regulator are considering widening their probe of United States trading giant Jane Street Group to investigate it for tax evasion in addition to an earlier charge of price rigging in the Bombay Stock Exchange's benchmark Sensex, according to media reports. The tax evasion charge comes on the heels of market regulator, the Securities and Exchange Board of India (SEBI), seizing 48.43 billion rupees ($570m) and banning four Jane Street-related entities from operating in the market for alleged price manipulation in the National Stock Exchange (NSE). SEBI's order has roiled the Indian markets, raising questions about regulator surveillance and investor protection in the world's largest options trading market. Trading in India's weekly equity index options has slumped by a third on the ban on Jane Street, the Reuters news agency reported on Thursday. Trading of equity options lets investors buy or sell a stock at a predetermined price and date. As the Indian market rapidly grew to handle more than half of all global options trades, retail investors entered the market too. Questions of price manipulation have dogged this rapid rise but remained vacuous until a New York court case in April 2024, where Jane Street alleged that its rival, Millennium Partners, had stolen its algorithms that helped it make in the Indian options market. A whistleblower, Mayank Bansal, then made presentations to SEBI showing Jane Street's trading patterns. Bansal had agreed to speak to Al Jazeera about his interaction with SEBI on the matter, but then backtracked. On July 3, in a detailed interim order, the regulator said that 'by preponderance of probability, there is no economic rationale that can account for this sudden burst of large and aggressive activity … other than the intent to manipulate the price of securities and index benchmark'. SEBI has alleged that Jane Street accumulated large long positions in stocks that are a part of the NSE's Bank Index and built large short positions in index options at the start of trade. Around market closing time, it would reverse its trades in the cash and futures segments, pushing down the index and earning large profits in the options segment. This activity was blurred by its offshore entities making some of these trades. 'Lawyers [can] push back with SEBI on jurisdiction-related issues, but when underlying [Indian] securities are issued, SEBI can take action,' Joby Mathew, managing partner at the law firm Joby Mathew and Associates and a former legal officer at SEBI, told Al Jazeera. Jane Street has disputed SEBI's findings and has hired lawyers to represent it before SEBI in the case. It has deposited the 48.43 billion rupees ($563m) of allegedly ill-gotten gains in an account pending the investigation and final report. 'Such processes typically take eight to 24 months,' especially in 'complex manipulation cases', Sumit Agarwal, a former SEBI officer and cofounder of Regstreet Law Advisors, told Al Jazeera in an emailed response. But the investigation can only be part of a broader questioning of Jane Street and the regulator's role in identifying and curbing such trades sooner and protecting retail investors. 'Highly speculative and volatile' As India's options market grew, retail investors were drawn to it, enticed by the growing volumes, the prospect of quick gains and less fettered trades than the equities market, where a rapidly rising stock could hit circuit breakers, leading to a halt in trading to prevent manipulation. Mathew says his clients from the options trading segment range from students to award-winning cardiologists who may not have a refined knowledge of the market but were sold on the idea by traders or social media influencers. Most ended up losing money. Deven Choksey, managing director at the Mumbai-based stock brokerage KR Choksey Shares and Securities, says retail investors form nearly half the Indian options market, while Jane Street and other sophisticated institutions form a little more. 'It's like a bullock cart facing a race car. Their meeting is bound to cause accidents.' If Jane Street is found to have manipulated the market, its earnings would have come through losses for retail investors. Bhargavi Zaveri, a financial regulations researcher formerly at the National Institute of Public Finance and Policy and currently a doctoral researcher at the National University of Singapore, says retail investors have made losses in the options segment, but the total amount is not clear. Identifying and compensating investors can be hard in such cases. So even if the final order goes against Jane Street and the 48.43 billion rupees fine goes into an investor protection fund, it may be hard to distribute it onwards to retail investors who incurred losses. The best protection may be to stem irregular trades early, experts say. 'SEBI has a surveillance system and they can well monitor the markets in a timely way.,' says Choksey. SEBI's interim order is based on trades made by Jane Street between January 1, 2023 and March 31, 2025, a period in which retail investors may have incurred substantial losses, going by SEBI's estimates. Regstreet's Agarwal says, 'SEBI's own 2024 consultations flagged expiry day options as highly speculative and volatile.' India has fortnightly expiry dates for options, which is when they have to be settled. That is when Jane Street allegedly manipulated prices. In a February 6 letter, SEBI told Jane Street, 'The above trading activity prima facie appears to be fraudulent and manipulative.' But it did not issue its order curbing Jane Street until July 3. SEBI's recent measures limiting weekly expiries, tightening spreads and higher margins 'reflect a push for greater protection' for retail investors, Agarwal says. But the best way to protect retail investors would be to have them trade separately from proprietary trading firms in the options segment, Choksey points out. 'India is unique … and in no market will you see so many retail investors. So, SEBI must create product differentiation by customer segment.' to protect retail investors Chiksey says. Challenges in proving manipulation In an internal email, Jane Street reportedly told employees it was using 'basic index arbitrage trading' and called SEBI's allegations 'extremely inflammatory'. It has hired Mumbai-based law firm, Khaitan and Co, to represent it before SEBI. Proving price manipulation involves showing intent, which can be hard, and experts are divided on whether a SEBI investigation will be able to demonstrate that. 'Trading to incur losses makes no sense, and so it indicates manipulation,' says Mathew, the former legal officer. But NUS's Zaveri says it is not so clear. 'I think three problems are being conflated here. One, the size of the options segment being manifold the underlying cash segment. Two, that retail investors have made losses on the options segment, which I'm not sure have been quantified. Three, Jane Street arbitraged between an illiquid cash and highly liquid options segment.' According to her, the three occurrences may not prove the intent to manipulate. Under Indian law, proving manipulation is challenging and 'Jane Street can argue its expiry day trades were legitimate index arbitrage recognised by regulators, making a manipulation finding difficult without clear intent evidence,' Regstreet's Agarwal says. Any action by SEBI could affect Jane Street's reputation. Last month, an investigation by Bloomberg found that Jane Street cofounder Robert Granieri was duped into funding weapons for an attempted coup to overthrow the government in South Sudan. If SEBI's final order lays out any action against Jane Street, 'they may well have to disclose it in their filings, which will affect them elsewhere in the world', says Mathew.
The Hindu
05-07-2025
- Business
- The Hindu
'Jane Street has completely eroded confidence in the sanctity of Indian markets'
In late December 2024, portfolio manager Mayank Bansal,witnessed abnormalities in the options volumes of Nifty, smelled a rat and alerted market regulator, Securities & Exchange Board of India (SEBI), that a top U.S.-based proprietary firm was into foul play. The SEBI investigated the matter and passed a suo motu interim order on Thursday banning the errant trading firm and impounding ₹4,843 crore of unlawful gains. In an interview with The Hindu, Mr. Bansal, among the largest portfolio manages in the options space in Indian equities, explains what he saw and talks about what needs to be done to deter such manipulators. Edited excerpts: When did you realise/suspect Jane Street was gaming the system? The market getting manipulated was clear by February 2024 itself. The identity of the manipulator was not clear by then but the options market dynamics, when viewed by any seasoned options trader, made it evident that the market was getting manipulated. The needle of suspicion was always on Jane Street due to the disproportionate profit it was accumulating. There was also a widely-publicised court case in the U.S. between Jane Street and Millenium where Jane had sued two of its traders who had left to join Millenium for having taken a highly-valuable secret strategy with them. It was inadvertently revealed during the court proceedings that the strategy pertained to Indian options and that Jane Street had made ₹8,000 crore from it in calendar year 2023. What was the anomaly? The anomaly was that the manipulator would take heavy options positions in the derivatives market on options expiry days, which is very deep and then move the underlying cash segment (which is far less liquid) to benefit from those. This was done via 2 constructs of expiries that Jane Street created: Case 1-Quiet expiry: Here the manipulator would sell at the money options in bulk leading to them becoming dirt cheap as indicated by their implied volatilities. It would then maintain the index in a very tight range to pocket all the premium. Interestingly, the expiry too would be right on the strike where it had sold its options. Case 2-Volatile expiry: Here, it would buy a lot of options on one side (say calls for profiting massively on the upside). It would buy in bulk. The options would become exorbitantly expensive with no rationale (imagine a bottle of water selling for ₹1 lakh) and then in the latter hours of the day, it would execute a steep upmove in the cash market to profit heavily from all the calls it had bought. The extent of cheapness of options (in case 1) or expensiveness of options (in case 2) would be absolutely inexplicably bizzare. Imagine a real estate property selling for ₹100 in case 1 and a bottle of water selling for ₹1 lakh in case 2. What did you do then? In early 2024, when most experienced traders had identified the manipulation, they were largely just waiting for the regulator to step in and the manipulation to correct, but the extent of manipulation just kept increasing right through 2024, all the way upto December, at which point the Nifty was being made to move 2% casually. It is at this point (in late December) that I made the presentation and mailed it to SEBI. Mr. Ananth Narayan (SEBI Wholetime Member who has passed the interim order on Jane Street) was kind enough to immediately respond on it and ask me for an in-person presentation at SEBI Bhawan, BKC in Mumbai. Since then, I have been in touch with SEBI and have been sending emails whenever I have noticed continued anomalies. Now that SEBI has passed the interim order, are you satisfied? SEBI's interim order is just that as of now, an interim order. The unlawful gain of ₹4,843 crore that they have mentioned is from their in depth analysis of just 21 expiry days. They are yet to evaluate all the other expiry days. This unlawful gain is most likely a small fraction of the entire unlawful gains which would be revealed over time. In all likelihood, almost the entirely of ₹36,500 crore would be unlawfully got. This is because Jane Street, which typically serves as a market maker in other geographies was, in fact, not market making in India at all, but was instead taking large directional exposures via options, which is highly odd. In doing so (something which is not its forte), it was making 9x of the next largest guy (Optiver) in India in terms of profits. Also impounding just the unlawfully gotten gains does not alone serve as justice. The penalty should ideally be much higher. Imagine travelling ticketless in a train and the fine on being caught being just the price of the ticket. How significant is the action against the American firm? Having said this, the judgment by SEBI is an absolutely landmark judgement. There is no question about that. India has taken a stand and this judgment will have reverberations across trading desks in Hong Kong Singapore, London and New York. It's a wake up call for anyone targeting Indian markets as soft targets. SEBI has not confined itself to fining small inconsequential amounts like ₹50 lakh or ₹ 1 crore. And made a stark departure from some of its earlier mellow judgements. What harm Jane Street has done to Indian capital markets and retail investors? Jane Street has completely eroded confidence in the sanctity of Indian markets. India's premier indices were held hostage to the whims of one single unscrupulous player. This continued for 2 years. It is fairly humiliating and embarrassing for us as a country. The bulk of the losses were borne by the retail segment. It was revealed in a recently published SEBI report that of the 3 key segments (FPIs, prop desks (institutions), retail), only the retail segment was incurring heavy losses. These losses were to the tune of ₹55,000 crore in FY2024. This is roughly the entire pool of profits in the Indian derivatives segment. It has also been revealed that Jane Street made ₹20,000-₹25,000 crore in the same period. This is 40% of the entire pool of profits in Indian deviates. And almost all of it illegally amassed via manipulation, largely funded by Indian retail investors. What more should be done to get Jane Street to justice and create a deterrent for other such market manipulators? SEBI should pass an exemplary judgement to deter future manipulators who try to do something similar. Only last week, a new manipulator seems to have entered the fray at a smaller scale. To put a conclusive end to this, SEBI should ideally have limits on the exposure entities take (even if high). Or send a soft message across that high exposures would be investigated. This messaging and the consequent surveillance around this should be iron clad. Entities with disproportionate profits need to be routinely investigated to keep Indian markers free of such scourge. SEBI had in February 2024 floated a consultation paper proposing net and gross intraday and overnight delta exposure limits. This was refuted by a body called the FIA- an obscure body representing the very interests of firms like Jane Street. Sebi initially disregarded that representation but ultimately conceded.
