MUMBAI, NSE, 21 OCTOBER 2024: The facade of the National Stock Exchange (NSE) with the bull statue and also stautes of six human sculptures representing an Indian family, at the National Stock Exchange (NSE), in Mumbai, India. PHOTO: SPECIAL ARRANGEMENT NSE Building
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SPECIAL ARRANGEMENT
The Securities and Exchange Board of India’s (SEBI) action against global trading firm Jane Street is beginning to cast a shadow on the derivatives market as NSE’s equity derivatives volume fell over 20 per cent on the next trading day, followed by a tepid expiry on BSE on Tuesday.
The daily turnover in the futures and options (F&O) segment of NSE fell to ₹ 1.15 lakh crore on Tuesday, down nearly 29 per cent from ₹1.61 lakh crore a day before the ban. This also marks a 7 per cent fall compared to last week’s Tuesday and a 45 per cent dip from the average of the previous 12 Tuesdays. On BSE, premium turnover fell by 5 per cent from last Tuesday, despite Sensex’s weekly expiry.
SEBI’s curbs
While some of this dip may reflect the impact of SEBI’s broader curbs on hyperactivity in the derivatives segment introduced last year, the immediate slump is being seen as a fallout from the Jane Street case – as both retail and algorithmic – treaded cautiously in the wake of the regulator’s action.
SEBI, in an interim order on Friday, alleged that Jane Street manipulated index levels on expiry days through large and aggressive positions in the cash and futures markets to engineer favourable outcomes. These were used to profit from significantly larger bets in the options market, misleading smaller traders in the process. The regulator has ordered the impounding of ₹4,844 crore in unlawful gains and barred the firm from markets.
“The revelation has made many retail traders nervous and cautious about participating in the derivatives market,” said Ajay Garg, CEO of SMC Global Securities. “Even the HFT proprietary traders are affected, as lower volumes in specific strikes make it harder for them to execute trades quickly and efficiently,” Garg said.
Jane Street was believed to contribute 25-50 per cent of daily index options volumes, brokers said, and along with other proprietary firms, accounts for nearly 60 per cent of the overall derivatives activity on NSE, particularly the options segment.
“The exit or restriction on a global proprietary firm like Jane Street may lead to a temporary dip in derivatives volumes, especially in index options where they were active liquidity providers,” said Ajay Kejriwal, Executive Director at Choice Equity Broking. “However, this development could pave the way for healthier market behavior, reducing aggressive arbitrage and potential price distortions.”
Optimistic
Still, market participants remain optimistic about the growing retail and institutional participation. “India’s market opportunity is structural, not cyclical and certainly not dependent on any one firm,” said Dinesh Thakkar, Founder and MD of Angel One.
Thakkar said that Indian equity derivatives have seen an influx of retail investors which fuels liquidity, volatility and opportunity. “Proprietary trading desks thrive in such environments, leveraging high-frequency and algorithmic strategies,” he said.
Analysts expect global prop players such as Citadel Securities, IMC Trading, Jump Trading, Optiver and Millennium — many of whom are investing heavily in Indian operations — to gradually step in, helping restore volumes and liquidity in the months ahead.
Published on July 8, 2025