By Startup Story Team
In a bold regulatory move, India’s market watchdog SEBI has barred U.S.-based proprietary trading firm Jane Street from operating in Indian markets. The action came after allegations of manipulation in Bank Nifty options. SEBI not only banned the firm’s activities but also froze over ₹4,800 crore in assets, marking one of the largest enforcement steps in recent market memory.
While this move was applauded by many in the industry, it also stirred serious questions about the impact on India’s trading ecosystem – especially for retail investors.
Nithin Kamath Applauds SEBI – But Sounds an Alarm:
Zerodha CEO Nithin Kamath reacted swiftly to the news, both acknowledging SEBI’s strong stance and warning of the potential aftershocks.
“You’ve got to hand it to SEBI for going after Jane Street. If the allegations are true, it’s blatant market manipulation,” Kamath wrote in a post on X (formerly Twitter).
He didn’t mince words about how Jane Street continued trading even after receiving warnings:
“The shocking part? They kept at it even after receiving warnings from the exchanges. Maybe this is what happens when you’re used to the lenient U.S. regulatory regime.”
Kamath also contrasted India’s market rules with those in the U.S., adding:
“Think about the structure of U.S. markets: dark pools, payment for order flow, and other loopholes that allow hedge funds to make billions off retail investors. None of these practices would be allowed in India, thanks to our regulators.”
Retail Liquidity at Risk?
Despite supporting SEBI’s decision, Kamath pointed to a deeper concern – India’s F&O markets are heavily dependent on proprietary trading firms like Jane Street.
“That’s the flip side. Prop trading firms like Jane Street account for nearly 50% of options trading volumes. If they pull back, which seems likely – retail activity (~35%) could take a hit too. So this could be bad news for both exchanges and brokers.”
He explained that reduced participation from these firms could widen bid-ask spreads, increase volatility, and discourage retail traders from staying active.
“The Next Few Days Will Be Telling”
Kamath urged the community to watch market volume trends closely in the aftermath of the ban:
“The next few days will be telling. F&O volumes might reveal just how reliant we are on these prop giants. I’ll share more data as and when anything interesting turns up.”
His concern highlights a key risk: while rooting out manipulation is essential, a sudden vacuum of liquidity providers can create a shockwave for markets that rely on tight spreads and consistent volumes.
