Latest news with #HFT
Mint
13-07-2025
- Business
- Mint
Jane Street hires Khaitan in index manipulation case
US high-frequency trader (HFT) Jane Street has hired top law firm Khaitan & Co. to defend itself in the case of alleged index manipulation, two people aware of the matter said. The Securities and Exchange Board of India (Sebi) alleged in an Interim order last week that Jane Street had manipulated the Bank Nifty and Nifty indices over two years by taking outsized trading positions, relative to other market participants, in their cash and derivatives constituents. According to the regulator, this enabled Jane Street to make unlawful profits of ₹4,844 crore from trades in weekly Bank Nifty and Nifty options. Also Read: Jane Street's woes may have only just begun. Sebi is now checking Sensex options 'The HFT is very close to closing the loop and is expected to pay the amount as asked by Sebi," said a senior executive aware of the development. Khaitan & Co and Jane Street did not respond to Mint's late night queries sent on Sunday. "The two options before Jane Street are to challenge Sebi's interim order or to respond to it," said Sandeep Parekh, founder of Finsec Law Advisors. "A challenge would mean it goes before the Securities Appellate Tribunal (SAT), and from thereon to the Supreme Court, depending on which way the tribunal rules. A response means they pay the amount and continue to trade in the market, reserving a right to seek legal redress as the Sebi investigation is ongoing." Sebi flags expiry-day strategy in January A key episode cited in the Sebi order occurred on 17 January 2024, the weekly expiry day for Bank Nifty options. The index opened 3.2% lower at 46,574 after HDFC Bank reported disappointing quarterly results. Sebi alleges Jane Street responded by purchasing Bank Nifty index futures and constituent stocks worth ₹4,370 crore, helping the index recover to a high of 47,212.75 and giving 'an impression of recovery" in the index. Also Read: Sebi's Jane Street crackdown sparks debate over arbitrage and manipulation As the index recovered, call option prices surged while put options slumped. Sebi claims Jane Street proceeded to then sell the costlier call options to and buy the cheaper put options from other participants in this phase, taking total bearish exposure in Bank Nifty options worth ₹32,114.96 crore. In the second leg, Jane Street allegedly unwound its positions, pushing down the index and its constituent stocks, which boosted the value of the purchased puts manifold while eroding the value of the sold calls, enabling them to rake in ₹735 crore in options that day as the Bank Nifty plunged 4.28% to close at 46,064.45. Firm denies wrongdoing Sebi alleges that through such strategies, Jane Street profited illegally to the tune of ₹4,844 crore over 21 days between August 2023 and May 2025. The regulator has ordered seizure of the alleged gains and barred Jane Street from the capital market until the money is deposited in an escrow account. Sebi also said Jane Street entities made a total profit of ₹36,502.12 crore between January 2023 and March 2025 through its trading strategies. Also Read: Buch slams 'false narrative' of delay in Jane Street probe In an internal staff communication after the Sebi order, Jane Street said it was 'deeply upsetting" to see the firm " mischaracterised." The note added, 'We are working on a formal response to Sebi." Addressing the specific allegation regarding 17 January 2024, Jane Street said, 'The strategy termed manipulation by Sebi was in fact a commonplace practice to align the large divergence in prices between the Bank Nifty index options and the price levels implied by its constituent stocks on that day. Priyanka Gawande contributed to this report
Mint
12-05-2025
- Business
- Mint
Sebi may offer relief to HFTs, but keep close watch on retail F&O activity
The market regulator is keeping a close watch on the options market and may tighten rules for retail investors further, if required, as their participation remains high despite last year's curbs. Alongside, the Securities and Exchange Board of India (Sebi) may drop a February proposal to monitor position limits for index options through the day, besides increasing position limits significantly in potential relief for high-frequency traders (HFTs), two people aware of the matter said. The regulator may also look to modify the market-wide position limit (MWPL) across exchanges and link it to delivery volumes of stocks to prevent manipulation and cornering of stocks by any entity, the people cited above said on the condition of anonymity. MWPL refers to the total number of stock options and futures contracts one can trade across exchanges . Glare on retail activity A key area of concern for the regulator is the level of retail activity in options that remains high, despite two sets of proposals in October and February 'Sebi will continue to monitor this segment closely and re-examine the trading activity of individual investors in index options as India continued to record the highest level of trading activity in index options globally, when compared to the size of its cash equity market," one of the two people cited above said. Also read | NSE expects HFT probe resolution, IPO by March In October, Sebi raised the lot size of index options to 75 shares from 25, and allowed only one weekly index options expiry per exchange to guard individuals who were losing heavily in the options market. A Sebi study had found that individuals lost a ₹1.89 trillion in FY22-24 due to excess speculation on options expiry day, while HFTs gained. Index options limits relaxed In February, it proposed imposing a gross limit on index options to ensure that HFTs didn't take disproportionately large positions. Some of these proposals were relaxed later after receiving feedback from market participants. Besides a proposal to change the calculation of an option's open position to accurately and transparently portray the market risk, Sebi also proposed a gross limit of ₹1,500 crore to be monitored on an intra-day basis. However, this faced much opposition from market participants. The regulator has now decided to raise the gross limit to ₹10,000 crore from ₹1,500 crore and the net limit to ₹1500 crore from ₹500 crore, with no intraday limit for index options. By the end of the day, the client must adhere to the ₹1,500 crore net limit and not exceed the ₹10,000 crore gross limit. 'This is a major relief from the earlier proposal which would have resulted in impact costs rising and thus liquidity being drained from the market," a broker said on the condition of anonymity, as the measures are yet to be announced. 'A major pain point has been removed." Read this | Angel One's March quarter hit by new Sebi curbs on F&O trading However, some trace the rise in options trading to a 2019 Sebi move. According to a broking industry official who spoke on the condition of anonymity, Sebi had mandated brokers to collect upfront margins from clients trading intraday in the cash market. This margin—20%—was earlier paid by brokers on behalf of clients, helping them leverage without making any margin payments of their own. Concerned that a client default would hit the broker and pose a systemic risk to the market, Sebi asked brokers to collect upfront margins. This, the broker said, prompted clients to move away from intraday squaring off to cheaper index options, skewing the cash and index options volumes. Another discount broking official said, introducing position limits for index options would have later opened the door for Sebi to monitor these limits and fix penalties as it did in the previous decade while introducing margins to trade for the cash market. To trade in cash segment, the broker is required to collect a 'value at risk "and "extreme loss margins" from a client to ensure against default and systemic risk. Lower market-wide positions Sebi also reduced market-wide position limits to 15% of a stock's free float from 20% earlier. Exchanges can stipulate the lower of 15% of a stock's free float or 65 times the average daily delivery volumes (ADDV) with a floor of 10%. This means if a stock has a free float of ₹100 and delivery of 10 paise, MWPL will stand at ₹15 and the ADDV at ₹6.50. In such a case, the MWPL will be ₹10, or 10% of the MWPL, which has been fixed as the floor. Index option limits for FPIs raised The regulator has also proposed calculating open interest of index options based on delta, which measures the change in option price for every point change in the underlying stock or index. Market participants have largely welcomed this move. Earlier, FPIs could take a position of ₹500 crore each in index options and futures contracts, over and above their underlying exposure. This limit was introduced in the aftermath of the covid-19 pandemic to prevent any market meltdown due to excessive derivatives trading. And read | Will lower tariffs lure back FPIs from other emerging markets? Now, for options, that has been increased to ₹1,500 crore net; and for futures, Sebi is likely to stipulate the higher of 15% of futures open position or ₹500 crore. For trading members (prop plus client), the limit is 15% of open interest or ₹7,500 crore, whichever is higher.
Yahoo
15-03-2025
- Business
- Yahoo
How Jump and Solana vets are building a hyper fast internet for blockchains
High-frequency traders are the whiz kids of Wall Street. They either code scripts to execute quick trades to eke out small profits that, multiplied by one or ten thousand times over, result in serious cash. Or they're able to act milliseconds faster than competitors to score big bets on market swings. Speed is paramount, which is why HFT traders have created their own private networks of internet cables—now, a crypto project called DoubleZero wants to do the same to speed up blockchains. 'We can use a whole different set of technologies that have basically been standard and de facto in the high-frequency trading world… but are not available over the public internet, so they've never been applied to blockchain before,' Austin Federa, cofounder of DoubleZero and a former executive at the Solana Foundation, told Fortune. Federa's project, which has the same obsession with speed as the firms in Michael Lewis's famous HFT book Flash Boys, has already attracted capital. DoubleZero Foundation, one of the entities behind the project, announced in early March that it had raised $28 million in a seed round led by marquee crypto investors Multicoin Capital and Dragonfly Capital. Other venture capital firms that contributed were Foundation Capital, Reciprocal Ventures, DBA, Borderless Capital, Superscrypt, and Frictionless. In exchange for their cash, investors received token warrants, or promised allocations of a yet-to-be-launched cryptocurrency, Federa said. CoinDesk Solana or Ethereum are like Amazon Web Services or Google Cloud—but decentralized. And like any cloud computing network, blockchains have physical servers that process users' transactions and run programmers' apps. Currently, when servers that power the Solana blockchain, for example, need to communicate with each other, those signals run over public internet infrastructure, said Federa. DoubleZero aims to create a private network of cables to speed up a blockchain's processing power. Jump Crypto, the digital assets subsidiary of HFT firm Jump Trading, and Malbec Labs are the engineering entities behind DoubleZero. They won't be laying down physical cables to construct the network, said Federa. Not yet, anyway. Rather, the company is cobbling together underutilized bandwidth from HFT firms, private companies, and even individuals to build out a faster physical network of cables than what is currently available for blockchains. And to make sure that, just like a blockchain, this physical network is decentralized, Federa's foundation plans to launch its own cryptocurrency to reward those who contribute bandwidth to the project. Federa's other cofounders are Mateo Ward and Andrew McConnell. Ward is the former CEO of Neutrona Networks, a portfolio company of Jump Trading that specialized in building private internet networks. And McConnell was a former top engineer at Jump. This story was originally featured on Sign in to access your portfolio
