By Mahi Jain
US-based trading firm Jane Street has moved the Securities Appellate Tribunal (SAT) against market regulator Securities and Exchange Board of India (SEBI) for withholding “important documents” during its investigation into alleged manipulation of the Bank Nifty.
SEBI had suspended Jane Street from trading in India earlier this year and frozen assets worth more than ₹4,800 crore, alleging that the firm was involved in unfair trading practices. The trades, SEBI added, were not legitimate arbitrage opportunities, but manipulative practices which led to an artificial price and market cornering. The regulator argued that Jane Street’s activity introduced an imbalance in the trading field, in contravention of fair trading rules.
Jane Street has vehemently denied any impropriety, though. The firm said in its appeal to SAT that its trading style was a legitimate form of arbitrage that was commonly employed in markets around the world, and that it did not aim to manipulate the indices. It had also argued that SEBI’s action is based on “incomplete information” as the regulator did not share all the documents, as well as evidence available in the matter. Those records, Jane Street says, are essential to its defense.
The case has attracted wide attention because it is one of the few times that a global giant in trading is taking a legal fight with India’s market regulator. The result could have broad implications for how SEBI evaluates sophisticated trading strategies, especially those used by foreign investors in the derivatives markets in India.
Market watchers said the dispute highlights the urgency of getting greater clarity in the kinds of arbitrage that are aggressive and the kinds that are manipulative. The SAT ruling will not just decide the fate of Jane Street’s frozen funds, but also serve as a precedent for other such cases in Indian markets relating to complex financial strategies.
In the meantime the industry moves on, waiting for SAT to rule on whether Jane Street will be allowed access to the documents that are being withheld from it and on its appeal of SEBI’s charges.