Many investors are pouring money into the derivatives market in the hope of seeing many times the profits in the stock market. In this, the number of those who have lost is more than those who have gained. 9 out of 10 traders in the derivatives market in india lose money, but the ones who have made the most profits and won in this segment are mostly big companies like Jane Street. Jane Street capital - This American hedge fund uses high-speed algorithms to trade crores of rupees in minutes. Through this, it has earned a profit of $ 2.3 billion (Rs 19662.7 crore) in the indian stock market alone. But how many people know that SEBI is investigating this company..? What is the connection between Jane Street and investors losing money in the derivatives market? Why is SEBI investigating Jane Street?  Companies like Jane Street make huge profits in minutes in the derivatives market using high-speed algorithms. According to reports, this company has made a profit of $ 2.3 billion in india, while another company called Millennium Management has made a profit of more than $ 1 billion. Since derivatives are a zero-sum game, for one to gain, the other has to lose, in which retail investors mostly suffer losses.
Why is SEBI investigating?: SEBI has been investigating Jane Street's derivatives trades for the last three years. The company took large positions in Nifty-50 and bank Nifty options, causing the market indices to move by 0.01%. Due to this, SEBI suspects that this company is making arbitrage profits. SEBI usually conducts a phased review of companies that reach the daily trading limit of Rs. 1,000 crore, and this company is also said to have frequently violated this limit. Although taking large positions is not prohibited under indian law, SEBI is conducting this investigation to ensure market fairness. Jane Street Trading Strategy: Jane Street uses high-speed algorithms to execute crores of trades in seconds. For example, if you bet on the Nifty-50 index in the options market that it will rise slightly, the company itself buys the shares of the companies in this index in the regular market and artificially raises the index.
 
 This small change gives huge profits in the highly leveraged derivatives market. By the time retail traders realize this and change their trades, Jane Street will be pocketing the profits. This pushes the market to decline and makes investors lose money. This is what SEBI is currently seeing as a major problem. Jane Street has now come to the field to examine how Jane Street has traded in the last 3 years. Since speed is important in such trading, not all companies will have such technology or algorithms. This is what makes Jane Street special.

Jane Street's 2024 controversy: The Millennium Management Company, a rival to Jane Street. In 2024, two employees of Jane Street were sued after they switched to Millennium Management Company. This case brought to light Jane Street's $2.3 billion profit in the indian derivatives market and Millennium Management's profit of more than $1 billion. SEBI suspects that these huge profits may be the main reason for the huge losses of retail traders, which has intensified the investigation. There is a view that the outcome of this investigation may restrict the High Frequency Trading system in the derivatives market, or impose restrictions on betting levels. Impact on retail investors: India's derivatives market was the busiest options market in the world in 2024, and the role of large companies is important for this. However, firms that take large positions can affect the market and cause losses for retail traders. Retail investors should fully understand the risks before engaging in derivatives trading.
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Sowmiya Sriram

30/06/2025 08:31 AM