TaxTMI 
TaxTMI 
TaxTMI 
2025 (8) TMI 1079
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................. 12 "Extended Marking The Close" Strategy ................. 51 CONTINUING VIOLATION & DISREGARD FOR REGULATORY CAUTION ........ 68 ALLEGED VIOLATIONS of SEBI ACT AND PFUTP REGULATIONS ................... 87 COMPUTATION OF ILLEGAL GAINS .................... 94 NEED FOR INTERIM DIRECTIONS ................................. 96 ORDER: .................................... 103 A. BACKGROUND: 1. Based on media reports titled 'Jane Street-Millennium Suit: 'Secret' Strategy Concerns India, Hearing Reveals' and 'Ex-Jane Street trader pillories claims he stole trade secrets', published during April 2024 wherein it was inter-alia mentioned that Jane Street and its associated entities alleged unauthorised use of their proprietary trading strategies in Indian options markets, SEBI initiated preliminary examination into trading activity of Jane Street and associated entities (collectively referred to as "Jane Street Group" or "JS group") to ascertain any market abuse. The chronology of some of the subsequent events is given in the following Table. Table 1 Date Event April 2024 SEBI carried out an analysis based on media reports referencing a legal dispute involving Jane ....
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....e the United States District Court Southern District of New York available at https://www.sewkis.com/wpcontent/ uploads/Jane-Street_amended-complaint.pdf] Jane Street Group LLC was established in the year 2000. Services are provided in the U.S. by Jane Street Capital, LLC and Jane Street Execution Services, LLC, each of which is a SEC-registered broker dealer and member of Financial Industry Regulatory Authority, USA ("FINRA"). Regulated activities are undertaken in Europe by Jane Street Financial Limited, an investment firm authorized and regulated by the U.K. Financial Conduct Authority, and Jane Street Netherlands B.V., an investment firm authorized and regulated by the Netherlands Authority for the Financial Markets (Autoriteit Financiële Markten), and in Hong Kong by Jane Street Hong Kong Limited, a regulated entity under the Hong Kong Securities and Futures Commission. Each of these entities is a wholly owned subsidiary of Jane Street Group, LLC. [https://www.janestreet.com/who-we-are/] 3. Upon examination of the audited financial statements of JSI Investments Private Limited (Entity No. 1 in this Order), and the related party disclosures contained therein, it was obser....
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....le stocks and indices such as BANKNIFTY. The following illustrations explain how some of these interrelationships come about: 7.1. If the price of a stock futures or index futures contract were to be significantly higher than the underlying stock or index price, arbitrageurs can sell the futures at a high price, buy the stock or index components in cash markets at a low price, and lock into an assured profit on expiry of the futures contract. Similarly, if the price of a stock futures or index futures contract were to be significantly lower than the underlying stock or index price, an opposite side arbitrage opportunity would arise. As a result of these arbitrage guardrails, the price of a stock futures or index futures contract generally moves in tandem with the price of the underlying stock or index. 7.2. Stock prices and stock option prices are also bound by arbitrages. 7.2.1. The payoff from buying a call option and selling a put option on a stock or index simultaneously at the same strike price is equivalent to buying a forward contract on that stock or index at that strike price. This is the principle of "put-call-parity" in options that connects the prices of options w....
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....ed, the following is noted: Table 2 Cash market total traded turnover in the 12 BANKNIFTY stock constituents (A) INR 29,225 crores Futures market total traded turnover in the 12 BANKNIFTY stock constituents (B) INR 43,589 crores Futures market traded turnover in BANKNIFTY index (C) INR 32,607 crores BANKNIFTY options cash equivalent (or Futures equivalent or delta equivalent) traded turnover (D) INR 1,03,17,127 crores Relative size of BANKNIFTY options market to cash market of its 12 constituent stocks, based on cash equivalent traded turnover (=D/A) 353 times Relative size of BANKNIFTY options market to the total of cash and futures market of its 12 constituent stocks, and BANKNIFTY index futures, based on cash equivalent traded turnover =D/(A+B+C) 98 times 9. As a corollary to the above, on weekly index option expiry day, many more entities and individuals trade in index options than do entities and individuals in the associated cash and futures markets. In other words, given the interrelationship between prices of derivative instruments and the prices of their underlying stocks or indices, many that trade in index options look for signals in the underlying index (det....
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....bove, on weekly index option expiry day, by aggressively influencing the underlying cash and futures market with significant volumes (relative to those markets), a group of entities acting in concert with adequate funds and capital at their disposal, can influence and manipulate the index levels. This in turn can allow them to put on significantly larger and profitable positions in the highly liquid index options market by misleading and enticing large number of smaller individual traders. It could also be used to engineer the closing of the market on expiry day in a manner that benefits enormous index option positions that they may be running to expiry. Such activities would prima facie be in violation of PFUTP regulations. D. METHODOLOGY FOR ANALYSIS 13. For the reasons earlier recorded in this Order, for the purpose of the examination, dealings in securities by the Entities have been viewed as a collective group ('JS Group') and not as individual entities. As noted earlier, SEBI had observed that the JS Group was consistently running what appeared to be by far the largest risks in 'cash equivalent' terms in F&O particularly on index option expiry days. While trading patterns c....
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....rading days were ranked by profits in BANKNIFTY options contracts. From this list, the top 30 most profitable days were shortlisted for analysis. 14.5. From the top 30 profit-ranked days, 19 number of derivative expiry days (weekly or monthly) were specifically listed. [It was observed that Jane Street Group's activity was heavily concentrated around expiry days, both in terms of GTV and options positioning. On such days, the index closing value has direct bearing on options payoff, thereby creating both the motive and the opportunity for influencing settlement outcomes. This filter ensured analytical focus on those days where the potential for derivative manipulation was structurally the highest.] 14.6. Out of the aforementioned 19 number of days, a granular intraday (at minute level) analysis of trading activity was carried out for the said days [The review involved minute-wise data parsing and graphical visualization of multiple variables to identify potential instances of market manipulation or sentiment distortion. The graphs were then also analysed to assess whether the trading behaviour was manipulative in nature.] and accordingly 17 days were shortlisted for detailed an....
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....ressive, in a manner that tends to push up prices. This action supports or pushes up the prices of BANKNIFTY constituents and hence the index itself. As BANKNIFTY Index is supported/rises from the lows, Put options on the index become cheaper, while Call options become expensive. Simultaneously, at a time when participants in index options JS Group builds large short Step Time Window Action Impact on Market Impact on Index Options markets are misled by the above support for BANKNIFTY, JS Group builds effectively INR 32,114.96 crores of bearish positions in the much more liquid BANKNIFTY index options by buying cheap Put options and selling expensive Call options JS Group builds large short BANKNIFTY positions, 7.3 times the size of the long cash/ futures positions 2 Patch II: 11:49 AM - 15:30 PM JS Group reverses and sells practically all of the net cash/ futures positions in BANKNIFTY constituent stocks that were bought in Patch I. The sizes are large, compared to market trading volumes in these segments. The sales are aggressive, in a manner that pushes down prices in the component stocks and hence index. JS Group books losses in intraday cash/ futures mark....
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....147 16,363 39,16,350 57.94 1,22,840 1,81,73,024 268.48 21.58% BANKBARODA 09:15:47 11:08:00 227.45 232.35 227.25 230.55 13,767 31,54,397 72.64 71,584 1,28,09,188 294.70 24.65% IDFCFIRSTB 09:15:50 11:07:40 87.05 89.65 86.8 87.2 5,515 67,54,912 59.56 82,395 4,27,89,694 376.65 15.81% AUBANK 09:15:45 11:20:08 763.55 783.95 747.85 758.2 18,274 5,73,988 43.76 79,577 23,03,461 175.45 24.94% PNB 09:15:57 11:07:28 97 98.9 96.8 97.95 4,940 52,38,342 51.53 74,739 3,17,55,556 311.79 16.53% It is pertinent to note that during this Patch I, JS only undertook purchase trades in these constituent stocks (cash markets). 15.5. JS Group purchases in the BANKNIFTY constituent stock futures during Patch I are detailed below: Table 8 Scrip Expiry Buy start time Buy end time Open High Low Close No. of buy trades - JS Buy trade quantity - JS Buy side TV in INR Crs. - JS (A) No. of buy trades - Market- wide Buy trade quantity - Market-wide Buy side TV in INR Crs. - Market- wide (B) JS's traded value relative to market- wide traded value (in %) (A/B) HDFCBANK 25-Jan-24 09:57:43 09:58:05 1587.7 1589.1 1587.1 1589 52....
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.... in the 12 BANKNIFTY component stocks and their futures across all market participants during this Patch I. It was by far the single biggest net buyer of these stocks put together during this patch. This burst of buying clearly would have supported the prices of these securities. In addition, we examined Last Traded Price (LTP) based impact analysis - i.e., whether the orders and trades were placed or dealt above or below prevailing market prices by JS Group, thereby tending to push the price up or down. This transition from volume-based analysis to price-impact assessment is critical in further evaluating whether the activity was benign or aggressive. The result of the said analysis, capturing both order-level and trade-level LTP, is placed below. 15.8. LTP analysis of JS Group purchases in the BANKNIFTY constituent stocks (cash market) during Patch I is detailed below: Table 9 - Order level LTP-based analysis [For this table, only orders that resulted in trades during the patch have been considered. Further, calendar spread orders have not been considered in aforementioned data.] Scrip Buy order start time Buy order end time No. of buy orders entered No. of buy orders abo....
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....26 22880 2137 2,197.20 -262.70 1,934.50 -1928.3 SBIN 09:15:45 11:20:11 27894 6036 20798 1060 905.10 -85.20 819.90 -818.3 KOTAKBANK 09:15:43 11:20:09 35815 7850 25830 2135 2,885.95 -282.75 2,603.20 -2622.45 INDUSINDBK 09:15:43 11:19:54 21172 8147 11759 1266 3,113.40 -189.65 2,923.75 2917.5 FEDERALBNK 09:15:47 11:07:41 16363 2464 13394 505 133.60 -25.85 107.75 -107.5 BANKBARODA 09:15:47 11:08:00 13767 3144 10054 569 214.05 -32.80 181.25 -178.15 IDFCFIRSTB 09:15:50 11:07:40 5515 327 5144 44 17.40 -2.25 15.15 -15 AUBANK 09:15:45 11:20:08 18274 5590 11423 1261 1,266.25 -131.35 1,134.90 -1140.25 PNB 09:15:57 11:07:28 4940 279 4631 30 14.90 -1.55 13.35 -12.4 *The figures are an aggregation of the difference between the "Trade Price" and the "Last Traded Price" 15.9. LTP analysis of JS Group purchases in the BANKNIFTY constituent stock futures during Patch I is detailed below: Table 11 - Order level LTP-based analysis[For this table, only orders that resulted in trades during the patch have been considered. Further, calend....
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....s trades.] HDFCBANK 25-Jan-24 09:57:43 09:58:05 52 21 25 6 4.25 - -0.65 3.60 -2.3 ICICIBANK 25-Jan-24 09:15:05 11:46:50 6751 2996 3237 518 436.30 ʻ -51.30 385.00 -391.8 AXISBANK 25-Jan-24 09:15:08 11:46:55 4051 2378 1236 437 430.20 -51.80 378.40 -381.4 SBIN 25-Jan-24 09:15:07 11:46:18 3116 1340 1500 276 160.45 -23.05 137.40 -139.15 KOTAKBANK 25-Jan-24 09:15:05 11:46:59 3685 1927 1338 420 505.80 -76.40 429.40 -457.5 INDUSINDBK 25-Jan-24 09:15:08 11:46:55 2206 1454 438 314 459.20 -70.55 388.65 -387.8 FEDERALBNK 25-Jan-24 09:15:05 11:46:28 1215 290 863 62 19.50 -3.60 15.90 -16.4 BANKBARODA 25-Jan-24 09:15:06 11:46:47 1798 687 1034 77 59.35 -4.85 54.50 -50.95 IDFCFIRSTB 25-Jan-24 09:15:05 11:46:50 1293 140 1129 24 7.40 -1.20 6.20 -6.6 AUBANK 25-Jan-24 09:15:16 11:46:56 1196 787 239 170 240.90 -29.45 211.45 -217.65 PNB 25-Jan-24 09:15:06 11:41:32 977 154 804 19 8.35 -0.95 7.40 -4.95 *The figures are an aggregation of the difference between the "Trade Price" and the "Last Traded....
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.... period. This divergence suggests that while the broader market was exhibiting a bearish sentiment, JS Group was exerting upward price pressure across key index stocks. Overall, JS group purchased a significant INR 572 crores of stocks and futures in these six major BANKNIFTY component stocks during these 8 minutes. 15.16. Such activity, particularly in the opening minutes of the trading session, appears to have had a meaningful impact on the index level. The BANKNIFTY index moved significantly from 46,573.93 to 47,176.97 during this patch, a rise of over 600 points. The size, timing, alignment, and aggressive nature of JS Group's buy-side trades across high-weight constituents during this window supports the inference that the Group's actions contributed materially to this upward movement. 15.17. As will be shown below when considering the trading of JS Group in index options during this period, JS Group utilized this spike up in the index, which had been triggered largely by their own aggressive buying in BANKNIFTY component stocks and futures, to sell BANKNIFTY calls and buy BANKNIFTY puts and therefore put on significant larger short side positions in BANKNIFTY. 15.18. Fo....
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....icipants, in the BANKNIFTY index options markets than in the underlying cash and futures markets. The vast majority of BANKNIFTY options participants that do not participate in the underlying cash or futures markets look to the index, determined by the cash market levels, to price and take a view on index options. In that sense, the aggressive and large intervention by the JS Group in Patch I lulled and induced the many participants in the BANKNIFTY index options to deal at prices that were heavily influenced by the intervention of JS Group in the component stocks and futures. 15.21. To further understand the underlying intent and design of the Jane Street Group's options strategy in granular detail, it is particularly instructive to examine how the Group built its exposure in Bank Nifty options during the first 8 minutes of the trading day. Accordingly, trades in select Put and Call Option contracts during the patch from 09:15:00 to 09:22:59 - during the time when the group was notably aggressive in its cash/ futures purchases, as noted earlier - were analysed. 15.22. The opening and closing premiums of the selected Put and Call Option contracts during the identified patch, al....
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....278.8 253.4 242.65 0.5 17/01/2024 BANKNIFTY 2024-01-17 BANKNIFTY_CE_2024-01- 17_47200 146.75 303.65 229.95 190.6 212.95 214.35 217.75 196.35 186 0.35 17/01/2024 BANKNIFTY 2024-01-17 BANKNIFTY_CE_2024-01- 17 47300 98.4 223.8 174.35 145.1 161.4 161.95 164.85 147.2 138.8 0.9 17/01/2024 BANKNIFTY 2024-01-17 BANKNIFTY_CE_2024-01- 17 47400 26.75 157.45 126.9 107.45 118.4 119.05 120.75 107.9 99.6 0.3 17/01/2024 BANKNIFTY 2024-01-17 BANKNIFTY_CE_2024-01- 17_47500 21.25 106.5 89.65 77.5 85.1 84.75 86.5 77.7 70.75 0.45 17/01/2024 BANKNIFTY 2024-01-17 BANKNIFTY_CE_2024-01- 17 47600 15 70.4 62.5 54.8 58.8 58.25 59.85 53.75 48.1 0.2 17/01/2024 BANKNIFTY 2024-01-17 BANKNIFTY_CE_2024-01- 17 47700 15 48.35 43.5 38.45 39.8 39.05 40.55 36.5 32.25 0.2 15.23. The trading pattern of JS Group in both BANKNIFTY Call and Put options reflects a clear bearish sentiment in cash-equivalent terms. In the call options segment, JS Group net cash-equivalent short exposure on BANKNIFTY during these eight minutes increased by INR 3,661.16 Cr. 15.24. Similarly, in the BANKNIFTY Put options segment during these eight minutes, t....
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.... 47,925 46800 429.65 527.9 15,825 427 690 31,995 -50,48,16,880 44300 1.50 2.85 1,02,420 46900 357.55 477.3 24,735 362 600 38,265 -37,13,47,831 44400 1.65 2.95 82,080 47000 287.5 605.3 69,210 287 560 2.11,710 -3,43,82,45,169 44500 2.1 2.35 8,100 1.70 2.80 1,39,020 47100 229.8 421 40,140 228 417 4,31,280 -9,21,87,45,105 44600 27 2.3 900 1.90 3.00 55,995 47200 146.9 422.95 50,055 177 328 7,90,050 -14,68,92,82,417 44700 . 2.00 2.95 1,18,980 47300 135.05 313 32,940 131 249 4,24,620 -6,36,15,71,301 44800 2.55 2.55 2.20 3.00 79.770 47400 98.05 275.7 17,670 96 253 2,32,995 -1,56,62,44,094 44900 2.15 2.55 1,20,330 47500 69 235.3 40,950 61 193 97,710 -60,45,18,616 45000 2.65 3.15 1,68,210 47600 47.95 152.7 12,780 47 134 30,960 -15,81,54,968 45100 3.00 3.35 21,750 . 47700 32.15 92 10,665 31 82 25,200 -8,92,97.401 45200 . ....
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....78,045 -24,17,29,92,687 49800 2.55 2.8 1,665 - 47300 179.9 344.55 3,83,520 216.90 341.75 62,565 -9,95,98,83,243 49900 2.55 3.2 1,27,380 - 47400 208.85 400 1,69,960 273.45 404.40 25,260 -5,71,55,84,334 50100 2.35 31,125 3 3 9,000 - 47600 311.4 555 21,780 228.75 500.00 5.580 -65,67,66,281 50200 23 3. 46.695 3 3 1,800 - 47700 220.45 630 7,320 493.95 608.60 1.665 -23,61,13,773 50300 2.35 3.15 42,900 3 3 1,800 - 47800 604.55 680 2.805 352 05 690.00 2.280 -2,16,95,752 50400 2.25 3.15 85.395 2 3 6.300 - 47900 740 759.15 1.590 713.35 815.25 8.055 28.81,84,338 50500 2.15 2.9 80,880 3 3 1.800 - 48000 830 900 6,075 791.80 905.75 5.970 -57,50,522 50600 2.15 3.2 92,610 2 2 8.040 - 48100 925 1000 4.080 868.30 974.35 2.655 -6,62,90,669 50700 22 3.15 92,520 2 2 2,370 - 48200 1050 1100 2.775 998.00 1,055.65 570 -10,27,00,477 50800 2.1 3.1 45,030 2 2 4,500 - 48300 1115 1150 455 - -2,17,26,730 50900 1.9 3.15 1,36,770 - - 48400 1269.9 1269.9 30 &n....
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...., was 7.3 times the INR 4,370.03 crores long position built by the group aggressively in the component cash/ futures markets 15.28. On further examining the trading behaviour of Jane Street Group on 17 January 2024, it is observed that a significant number of their BANKNIFTY option derivative trades were in and around At-the-Money ("ATM") strike contracts. Note that trader interest and liquidity in ATM contracts tends to be highest, allowing the JS Group to accumulate large sized BANKNIFTY index options exposures in the manner that they did. Patch II: Aggressive cash and futures selling of BANKNIFTY components, reversing the aggressive purchases of patch I 15.29. Once the BANKNIFTY index option positions were in place through Patch I, the JS Group began systematically squaring off and dumping its holdings in the underlying constituents (through cash as well as futures segment) during Patch II spread across the rest of the day, i.e. between 11:49:00 and 15:30:00. During this Patch II, BANKNIFTY Index futures were also separately sold by the Group. 15.30. The nature and extent of selling by JS Group in the cash and futures market of BANKNIFTY component stocks, and in BANKNIFTY....
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....93,350 4,344.02 22.01% ICICIBANK 25-Jan-24 11:49:22 15:29:51 983.15 988.85 976.75 978.85 8,129 67,23,500 661.15 33,471 2,68,02,300 2,635.67 25.08% AXISBANK 25-Jan-24 11:50:26 15:29:53 1094.6 1097.3 1080 1081 3,861 29,70,000 323.10 16,611 1,17,85,625 1,282.23 25.20% SBIN 25-Jan-24 11:55:54 15:29:54 627.6 631.45 624.7 626.4 3,776 66,88,500 419.67 15,564 2,63,55,000 1,653.75 25.38% KOTAKBANK 25-Jan-24 11:49:15 15:29:54 1793.65 1794.1 1775.9 1778.3 3,556 18,41,600 328.53 15,490 72,12,000 1,286.77 25.53% INDUSINDBK 25-Jan-24 11:51:58 15:29:50 1648.55 1656 1636 1645 2,354 13,71,500 225.58 9,100 51,06,000 839.92 26.86% FEDERALBNK 25-Jan-24 11:56:52 15:28:27 146 147.25 144.3 146.2 1,319 74,00,000 107.83 5,905 3,50,40,000 510.79 21.11% BANKBARODA 25-Jan-24 11:56:28 15:29:52 230.65 230.65 225.1 226.15 1,656 62,27,325 141.81 11,059 3,84,14,025 873.36 16.24% IDFCFIRSTB 25-Jan-24 11:56:50 15:29:54 86.8 86.9 85 85.4 1,581 1,39,27,500 119.76 8,880 7,65,15,000 657.82 18.21% AUBANK 25-Jan-24 11:57:18 15:29:45 748.4 760.7 744.2 750.3 1,380 14,55,000 109.37 5,292 57,8....
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.... orders have not been considered in aforementioned data.] Scrip Sell order start time Sell order end time No. of sell orders entered No. of sell orders above LTP No. of sell orders at LTP No. of sell orders below LTP Order price based LTP impact for orders placed above LTP* (in INR) (A) Order price based LTP impact for orders placed at LTP* (in INR) (B) Order price based LTP impact for orders placed below LTP* (in INR) (C) Order price based net LTP impact* (in INR) (A)+(B)+(C) HDFCBANK 11:49:59 15:28:40 11389 835 1859 8780 190.95 -2,043.50 -1,852.55 ICICIBANK 11:50:12 15:22:49 14262 772 5279 8211 73.80 - -1,399.80 -1,326.00 AXISBANK 11:50:01 15:12:04 23221 1566 8315 13340 164.50 - -3,005.30 -2,840.80 SBIN 11:49:59 15:29:22 14470 1238 5542 7690 102.60 - -743.90 -641.30 KOTAKBANK 11:50:09 15:28:49 13744 1609 4321 7964 361.60 - -2,581.55 -2,219.95 INDUSINDBK 11:50:13 15:29:08 10006 1650 3409 5066 338.20 - -1,280.90 -942.70 FEDERALBNK 11:50:34 13:54:05 1181 37 304 840 1.85 - -46.75 -44.90 BANKBARODA 11:50:06 14:38:07 2554 232 851 1471 14.35 -107.80 -93.45 IDFCFIRSTB 11:50:....
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....For this table, only orders that resulted in trades during the patch have been considered. Further, calendar spread orders have not been considered in aforementioned data.] Scrip Expiry Sell order start time Sell order end time No. of sell orders entered No. of sell orders above LTP No. of sell orders at LTP No. of sell orders below LTP Order price based LTP impact for orders placed above LTP* (in INR) (A) Order price based LTP impact for orders placed at LTP (in INR) (B) Order price based LTP impact for orders placed below LTP* (in INR) (C) Order price based net LTP impact* (in INR) (A)+(B)+(C) HDFCBANK 25-Jan-24 12:19:16 15:29:58 5581 678 1108 3795 82.60 - -747.10 -664.50 ICICIBANK 25-Jan-24 11:49:22 15:29:51 5640 556 1354 3730 49.55 - -482.00 -432.45 AXISBANK 25-Jan-24 11:50:26 15:29:53 2952 351 458 2143 42.20 -401.70 -359.50 SBIN 25-Jan-24 11:55:54 15:29:54 2525 300 539 1686 22.80 - -195.45 -172.65 KOTAKBANK 25-Jan-24 11:49:15 15:29:54 2905 432 387 2086 77.65 - -521.30 -443.65 INDUSINDBK 25-Jan-24 11:51:58 15:29:50 1914 214 201 1499 37.05 - -455.50 -418.45 FEDERALBNK 25-Jan-24 11:56:52....
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.... 11:56:41 15:29:01 1016 20 801 195 1.00 - -11.25 -10.25 9.25 BANDHANBNK 25-Jan-24 13:55:57 15:28:55 244 29 111 104 5.95 -21.40 -15.45 15.45 *The figures are an aggregation of the difference between the "Trade Price" and the "Last Traded Price" 15.40. In the BANKNIFTY Index futures market: Table 23 - Order level LTP-based analysis[For this table, only orders that resulted in trades during the patch have been considered. Further, calendar spread orders have not been considered in aforementioned data.] Scrip Expiry Sell order start time Sell order end time No. of sell orders entered No. of sell orders above LTP No. of sell orders at LTP No. of sell orders below LTP Order price based LTP impact for orders placed above LTP* (in INR) (A) Order price based LTP impact for orders placed at LTP* (in INR) (B) Order price based LTP impact for orders placed below LTP* (in INR) (C) Order price based net LTP impact* (in INR) (A)+(B)+(C) BANKNIFTY 25-Jan-24 14:46:14 15:08:45 1702 366 177 1159 594.00 - -4,374.55 -3,780.55 Table 24 - Trade level LTP-based analysis Scrip Expiry Sell trade start time Sell trade end time No. of sell trade....
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....tions positions saw a sharp and sustained rise. The MTM profit curve, when plotted minute-by-minute, shows an steep upward incline, particularly as the index accelerated its fall. Jane Street Group capitalised on this setup by selling the Puts purchased earlier and Buying back the Calls sold earlier, effectively locking in substantial gains across both legs of the trade. To illustrate: The expiry-day delta exposure transitioned from negative INR 7,311.19 Crore at around 09:30:00 to negative INR 46,620.79 Crore at peak around 13:53:00, and finally back to INR 24,884.63 Crore by close, indicating that the positions were not only directionally structured but also unwound within the same session as BANKNIFTY declined over the course of Phase II. The total profit on expiry-day contracts is estimated at INR 662.48 Cr, out of which INR 168.60 Crore (approximately 25% of day's profit) was generated during the 14:15-15:30 window alone. Note that in the intraday trading undertaken by JS Group in BANKNIFTY constituent stocks and futures, i.e., the aggressive and large buying in Patch I, followed by the aggressive and large selling in Patch II, the JS Group booked an intraday loss of I....
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....istinct intraday patches - the underlying buy patch and the underlying sell patch. 15.48. The sharp reversal of GTV trend post-expiry (on January 18) confirms that the heightened activity on the expiry day was event-specific and not part of regular trading behaviour. Why is the "Intra Day Index manipulation strategy" as described above considered manipulative? 15.49. As described above, on January 17, 2024, JS Group traded in an "Intra Day Index Manipulation pattern". Dealing in multiple segments across cash equities, stock futures, index futures, and index options simultaneously is certainly not by itself a breach of any regulation. However, what sets apart the trading pattern of the JS Group as described above as prima facie being manipulative, is the intensity and sheer scale of their intervention in the underlying component stock and futures markets, the rapid reversal of these large and aggressive trading in cash and futures without any plausible economic rationale, other than the concurrent activity in and impact on their positions in the BANKNIFTY index options markets. 15.49.1. In the morning (Patch I), JS Group were by the single largest and aggressive buyer in BANK....
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....ctivities would invariably tend to end with net trading losses. 15.50.2. Note that the intraday reversal of positions in the cash market was conducted by JS Group in its India entities viz. JSI Investments Private Limited. Note further that SEBI (Foreign Portfolio Investors) Regulations, 2019 do not allow FPIs to undertake intraday trades, instead, all of their trades must be settled. 15.50.3. By preponderance of probability, the sharp buying in BANKNIFTY component shares and futures in Patch I was designed to artificially push up BANKNIFTY Index, and thereby to push up the prices of BANKNIFTY calls and push down the prices of BANKNIFTY puts. JS Group certainly exploited this to the hilt, and they simultaneously purchased BANKNIFTY puts and sold BANKNIFTY calls in size, at very advantageous prices. 15.50.4. Note that JS Group was, by preponderance of probability, fully aware that they would reverse all of the significant purchases of BANKNIFTY stocks and futures of the morning by the end of the day. There were aware, therefore, that the stock and BANKNIFTY prices were being held artificially up for a short period of time by their own aggressive actions in the underlying cash ....
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....on prices in the interim and entice market participants in BANKNIFTY index options to trade at such distorted levels, while JS Group would take advantage of this and run much larger opposite side positions in the index options market. 15.51.4. JS, vide its letter to SEBI dated August 30, 2024, has suggested that these trades were to "remove unwanted delta" or to "manage overall delta". These bland statements do not take away from any of the arguments made above. By preponderance of probability, and given the arguments and data presented above, JS Group was undertaking an intentional, well-planned, and sinister scheme and artifice to manipulate cash & futures markets and hence manipulate the BANKNIFTY index level, to entice small investors to trade at unfavourable and misleading prices, and to the advantage of the JS Group. GRAPHICAL ANALYSIS 15.52. For reference, graphical analysis of trading and delta build-up for January 17, 2024 (weekly expiry of BANKNIFTY option contracts) is given below. 15.53. The graph above can be accessed through the QR code given below: 15.54. The graphical representation captures the following: Label (Bottom to Top) Meaning Color and chart us....
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....16. "Extended Marking The Close" Strategy 16.1. The JS Group's trading pattern constituting "extended marking the close strategy" is tabulated and summarized below, for ease of reference: Table 26 - Extended Marking the Close Strategy Time Segment Observed Activity Market Segment 09:15 - 14:30 Low-volume, non-directional or passive trading All segments 14:30 - 15:30 Accumulation/ holding of significant cash-equivalent positions in Index Options Index Options 14:30 - 15:30 Aggressive and large directional intervention in Index constituent stocks and futures, to move the market in a direction favourable to the large open positions in Index options Cash + Stock Futures +Index Futures 15:30 Close Index closes at a level favourable for the large positions of JS group in index options Index Post-Market Profits booked in Index Index Options 16.2. During the course of the extended examination, a different pattern from the earlier "Intraday Index manipulation pattern" was observed on July 10, 2024 and two other days, all of which also happened to be a BANKNIFTY expiry day. Unlike the January 17, 2024 pattern, which involved two distinct and opposite side trading patch....
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....ubsequently executed large and aggressive sell-side trades in underlying index constituents in stocks and futures in order to depress the BANKNIFTY index in the closing minutes. The resultant lower expiry value directly increased the profitability of their disproportionately large outstanding BANKNIFTY index options positions. 16.8. During the patch 14:30:00 to 15:30:00, Jane Street Group significantly sold off positions in BANKNIFTY constituent stocks in both the cash and stock futures markets. Further, significant sell-off activity was also observed in BANKNIFTY Index futures. The relevant data has been captured in succeeding paragraphs. 16.9. JS Group activities in the cash market of the BANKNIFTY constituent stocks Table 27 Scrip Sell start time Sell end time Open High Low Close No. of sell trades - Jane Street Group Sell trade quantity - Jane Street Group Sell side TV in INR Crs. - Jane Street Group (A) No. of sell trades Market- wide Sell trade quantity - Market- wide Sell side TV in INR Crs. - Market- wide (B) Jane Street Group's traded value relative to market- wide traded value (in %) (A/B) HDFCBANK 14:30:03 14:50:58 1623.6 1627.3 1623.3 1624.....
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.... 105.81 3,200 1,04,77,350 269.64 39.24% IDFCFIRSTB 25-Jul-24 14:31:17 15:27:14 78.19 78.54 78.05 78.4 794 71,32,500 55.86 2,151 1,83,75,000 143.93 38.81% AUBANK 25-Jul-24 14:30:15 15:27:15 631.2 633.1 628.6 630.9 942 11,17,000 70.48 2,510 28,36,000 178.98 39.38% PNB 25-Jul-24 14:30:39 15:27:09 119.52 119.96 119.25 119.54 816 72,00,000 86.14 2,242 1,92,56,000 230.42 37.38% 16.11. JS Group activities in the BANKNIFTY index futures market: Table 29 Scrip Expiry Sell start time Sell end time Open High Low Close No. of sell trades - Jane Street Group Sell trade quantity - Jane Street Group Sell side TV in INR Crs. - Jane Street Group (A) No. of sell trades Market- wide Sell trade quantity Market- wide Sell side TV in INR Crs. Market- wide (B) Jane Street Group's traded value relative to market- wide traded value (in %) (A/B) BANKNIFTY 31-Jul-24 14:30:23 15:29:54 52282.95 52371.8 52252 52311.5 2,526 1,40,655 735.86 15,787 5,63,940 2,950.42 24.94% 16.12. An examination of the Traded Volume (TV) data for July 10, 2024, reveals that Jane Street Group exhibited highly concentrated trading behaviour durin....
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....nipulation. 16.16. Such spike in market share, limited to a very specific time frame near market close, raises red flags when viewed in the context of derivative settlement mechanics, as the BANKNIFTY expiry is based on the last 30 minutes' volume weighted average price (the closing price) of its constituents. The high GTV concentration at close, in scrips that determine the index, implies that the Jane Street Group may have attempted to steer the index closing value through targeted constituent-level trades. 16.17. The LTP analysis (pertaining to cash, stock futures and BANKNIFTY Index futures), capturing both order-level and trade-level dimensions, is placed in the following paragraphs for detailed reference. 16.18. In the cash market: Table 30 - Order level LTP-based analysis[For this table, only orders that resulted in trades during the patch have been considered. Further, calendar spread orders have not been considered in aforementioned data.] Scrip Sell order start time Sell order end time No. of sell orders entered No. of sell orders above LTP No. of sell orders at LTP No. of sell orders below LTP Order price based LTP impact for orders placed above LTP* (in I....
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....tion of the difference between the "Trade Price" and the "Last Traded Price. 16.19. In the stock futures market: Table 32 - Order level LTP-based analysis[For this table, only orders that resulted in trades during the patch have been considered. Further, calendar spread orders have not been considered in aforementioned data.] Scrip Expiry Sell order start time Sell order end time No. of sell orders entered No. of sell orders above LTP No. of sell orders at LTP No. of sell orders below LTP Order price based LTP impact for orders placed above LTP* (in INR) (A) Order price based LTP impact for orders placed at LTP* (in INR) (B) Order price based LTP impact for orders placed below LTP* (in INR) (C) Order price based net LTP impact* (in INR) (A)+(B)+(C) HDFCBANK 25-Jul-24 14:30:14 15:27:12 1860 191 429 1240 19.80 -238.90 -219.10 ICICIBANK 25-Jul-24 14:30:05 15:27:14 1966 170 509 1287 16.20 - -202.65 -186.45 AXISBANK 25-Jul-24 14:30:07 15:26:48 1580 144 357 1079 15.10 - -213.05 -197.95 SBIN 25-Jul-24 14:30:00 15:27:14 1680 136 414 1130 9.90 - -151.80 -141.90 KOTAKBANK 25-Jul-24 14:30:03 15:27:15 1140 154 173 81....
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.... -62.50 56.25 55.95 PNB 25-Jul-24 14:30:39 15:27:09 816 62 368 386 1.44 - -11.56 -10.12 10.14 *The figures are an aggregation of the difference between the "Trade Price" and the "Last Traded Price" During this sell patch, the price impact in terms on the index after adjusting for weights of the constituents has been - 1,108.92 on the downside by JS entities and by all the other participants put together it was 1,182.71 on the upside, viz. indicative of strong downward price push created by JS entities. 16.20. In the BANKNIFTY Index futures market: Table 34- Order level LTP-based analysis[For this table, only orders that resulted in trades during the patch have been considered. Further, calendar spread orders have not been considered in aforementioned data.] Scrip Expiry Sell order start time Sell order end time No. of sell orders entered No. of sell orders above LTP No. of sell orders at LTP No. of sell orders below LTP Order price based LTP impact for orders placed above LTP* (in INR) (A) Order price based LTP impact for orders placed at LTP* (in INR) (B) Order price based LTP impact for orders placed below LTP* (in INR) (C) Order price based net....
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.... 2024, were executed well below the prevailing LTP and contributed directly to pushing down the index, thereby lowering the expiry settlement price, to favour their options position. 16.23. BANKNIFTY index futures are a highly liquid instrument, and trades in them can exert sentiment-driven influence on the index, especially when executed in large volumes near expiry. Moreover, futures prices tend to lead or reinforce movements in the underlying index. Therefore, deploying index futures aggressively on the sell side becomes an effective tool to amplify pressure on the benchmark level, especially when used in tandem with selling in constituent stocks. 16.24. Given the interrelationships, the combined effect of all these trades led to a sharp dip in the BANKNIFTY index, thereby pulling down its closing settlement value - the precise reference point used for the expiry of BANKNIFTY options. 16.25. Importantly, this LTP-impacting behaviour was not visible earlier in the day, where the Group's trades were either marginal or non-influential in terms of LTP. The sudden emergence of directional, high-intensity sell-side activity in the final minutes to settlement points to a delibera....
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....not coincidental. It perfectly overlapped with: * The initiation of aggressive sell-side trades in stocks and futures to the tune of INR 2,800 crores across segments, * A sharp decline in the BANKNIFTY index, and * The lead-up to expiry-time index settlement, which directly determines options settlement and payoff. 16.32. In summary, prima facie, JS Group undertook premeditated large and aggressive selling of INR 2,800 crores worth of BANKNIFTY constituent and related stocks and futures, to engineer a soft closing of BANKNIFTY on that expiry day, thereby helping them enjoy a benefit on the INR 44,153.87 crores of effective cash-equivalent short positions that JS Group held in BANKNIFTY index options expiring the same day. 16.33. On July 10, 2024, the Group's GTV witnessed a spike similar to that of January 17, 2024, with total traded value being approximately 4 times that of the previous and 1.5 times that of the next day Table 36 Day Dates GTV in INR Crores Cash (A) Stock Futures (B) BANKNIFTY Index Futures (C) Total GTV (12 (A)+(B)+(C) (12 Constituents) (12 Constituents) T-1 09-Jul-24 103.20 1,589.81 - 1,693.01 T 10-Jul-24 487.99 5,099.03 735.86 6,....
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....y around the expiry of index derivatives. Relevant excerpts from the communication are reproduced below: "It was observed that you along with your related entity, Jane Street GroupI Investments Pvt Ltd, were running abnormally high delta positions in the index derivatives segment and correspondingly small net sentimental OI. Such large directional OI (delta) can cause risk to market stability and raises concern for market integrity especially around expiry of contracts wherein your related entity has traded in cash market to favour large open positions in options. Such trading activity, prima-facie, raises concerns for market integrity on account of large delta positions in index derivatives, combined with concurrent act of taking and then reducing positions in the top constituents of the index through cash market / derivatives over a short period, to artificially influence the price of the index. It also creates an information asymmetry for other investors / traders in those constituents or derivatives contracts on index, who are not aware about such artifice and repeated occurrences of such instances cannot be considered as coincidence. The above trading activity prima fa....
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....ex Post-Market Profit realised on even larger bullish options positions Options 17.5. During the patch 13:26:00 to 15:30:00, Jane Street Group significantly bought positions in NIFTY constituent stocks in stock futures segment. Further, significant buy activity was also observed in NIFTY Index futures. The relevant data has been captured in succeeding paragraphs. 17.6. In the stock futures market: Table 38 Scrip Expiry Buy start time Buy end time Open High Low Close No. of buy trades - Jane Street Group Buy trade quantity - Jane Street Group Buy side TV in INR Crs. - Jane Street Group (A) No. of buy trades - Market- wide Buy trade quantity - Market-wide Buy side TV in INR Crs. Market- wide (B) Jane Street Group's traded value relative to market- wide traded value (in %) (A/B] ADANIENT 29-May-25 13:36:00 15:29:39 2,508.50 2,530.90 2,506.60 2,526.00 377 1,73,400 43.72 2,801 10,41,600 262.47 16.66% ADANIPORTS 29-May-25 13:26:09 15:29:52 1,398.40 1,411.60 1,396.60 1,402.70 669 4,20,800 59.16 4.673 23,30,000 327.53 18.06% APOLLOHOSP 29-May-25 13:35:51 15:27:00 7,000.00 7,110.50 7,000.00 7,109.00 357 62,750 44.33 2,350....
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....59.05 661.00 326 8,35,800 55.35 3,709 61,64,200 408.14 13.56% HINDUNILVR 29-May-25 13:26:06 15:29:33 2,363.30 2,377.00 2,361.60 2,364.00 717 2,93,700 69.54 3,731 12,73,800 301.59 23.06% ICICIBANK 29-May-25 13:26:06 15:28:44 1,442.00 1,458.20 1,441.50 1,453.50 2,466 28,58,100 415.21 15,873 1,32,04,800 1,917.42 21.65% INDUSINDBK 29-May-25 13:51:20 15:25:31 780.20 783.30 777.20 780.95 340 2,77,500 21.66 4,206 25,79,500 201.26 10.76% INFY 29-May-25 13:26:10 15:27:16 1,598.40 1,620.60 1,596.90 1,612.50 2,085 15,25,200 246.10 13,958 69,30,800 1,117.61 22.02% ITC 29-May-25 13:26:06 15:29:53 431.15 434.30 430.75 432.30 812 20,75,200 89.79 4,965 96,57,600 417.80 21.49% JIOFIN 29-May-25 13:26:36 15:25:51 271.00 274.70 271.00 274.25 527 14,48,700 39.57 3,882 78,45,750 214.33 18.46% JSWSTEEL 29-May-25 13:26:40 15:26:05 1,025.70 1,041.50 1,025.70 1,039.50 496 5,62,950 58.36 3,653 29,56,500 306.34 19.05% KOTAKBANK 29-May-25 13:26:10 15:25:49 2,094.10 2,114.20 2,093.50 2,107.20 908 5,40,000 113.85 5.268 24,05,200 506.98 22.46% LT 29-May-25 13:26:40 15:29:46 3,605.60....
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....26:10 15:25:48 5,478.00 5,652.00 5,475.50 5,588.00 827 1,33,300 74.28 9,731 12,05,500 672.19 11.05% ULTRACEMCO 29-May-25 13:26:10 15:25:27 11,859.00 11,949.00 11,839.00 11,915.00 536 50,200 59.82 3,753 2,32,800 277.30 21.57% WIPRO 29-May-25 13:35:52 15:25:34 255.19 257.74 255.19 256.80 385 17,28,000 44.36 2,442 86,16,000 221.15 20.06% 17.7. In the NIFTY Index futures market: Table 39 Scrip Expiry Buy start time Buy end time Open High Low Close No. of buy trades - Jane Street Group Buy trade quantity - Jane Street Group Buy side TV in INR Crs. - Jane Street Group (A) No. of buy trades Market- wide Buy trade quantity Market- wide Buy side TV in INR Crs. Market- wide (B) Jane Street Group's traded value relative to market- wide traded value (in %) (A/B) NIFTY 29-May- 25 13:44:26 15:05:35 25,010.00 25,144.90 25,002.00 25,101.00 5,213 9,98,100 2,505.28 32,112 40,09,200 10,062.88 24.90% 17.8. An analysis of the Traded Value of Jane Street Group on May 15, 2025, reveals a pattern of highly concentrated activity during the final hours of trading, particularly in the futures segment of NIFTY constituent stocks.....
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....INR) (A) Order price based LTP impact for orders placed at LTP* (in INR) (B) Order price based LTP impact for orders placed below LTP* (in INR) (C) Order price based net LTP impact* (in INR) (A)+(B)+(C) ADANIENT 29-May-25 13:36:00 15:29:39 204 95 94 15 50.80 - -7.00 43.80 ADANIPORTS 29-May-25 13:26:09 15:29:37 341 127 191 23 37.20 - -10.20 27.00 APOLLOHOSP 29-May-25 13:35:51 15:27:00 194 81 98 15 144.50 - -12.50 132.00 ASIANPAINT 29-May-25 13:26:09 15:25:40 491 188 246 57 69.20 - -13.30 55.90 AXISBANK 29-May-25 13:26:22 15:29:34 553 157 284 112 38.70 - -25.70 13.00 BAJAJ-AUTO 29-May-25 13:26:57 15:26:09 296 117 154 25 184.50 -38.00 146.50 BAJAJFINSV 29-May-25 13:26:13 15:27:00 225 92 86 47 46.10 -24.40 21.70 BAJFINANCE 29-May-25 13:26:13 15:25:43 360 127 158 75 203.00 -118.00 85.00 BEL 29-May-25 13:26:09 15:29:21 183 64 108 11 5.70 - -0.95 4.75 BHARTIARTL 29-May-25 13:26:08 15:25:37 703 179 341 183 38.00 - -48.60 -10.60 CIPLA 29-May-25 13:26:44 15:24:51 331 112 193 26 37.40 -4.60 32.80 COALINDIA 29-May-25 13:26:15 15:....
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....y-25 13:26:30 15:25:54 321 110 194 17 18.15 -1.95 16.20 SUNPHARMA 29-May-25 13:26:06 15:25:47 498 220 242 36 57.70 -7.30 50.40 TATACONSUM 29-May-25 13:26:35 15:29:45 220 86 124 10 23.90 -2.90 21.00 TATAMOTORS 29-May-25 13:26:32 15:17:40 454 155 264 35 15.30 -3.30 12.00 TATASTEEL 29-May-25 13:26:22 15:25:28 307 126 157 24 4.09 -0.69 3.40 TCS 29-May-25 13:26:06 15:29:34 696 200 351 55 167.40 -20.50 146.90 TECHM 29-May-25 13:26:24 15:23:15 257 110 124 23 38.20 - -4.10 34.10 TITAN 29-May-25 13:26:09 15:29:21 328 115 168 45 66.90 -66.80 0.10 TRENT 29-May-25 13:26:10 15:25:48 404 136 232 36 176.50 -39.00 137.50 ULTRACEMCO 29-May-25 13:26:10 15:25:27 258 77 157 24 205.00 -43.00 162.00 WIPRO 29-May-25 13:35:52 15:25:33 241 112 107 22 5.75 -0.52 5.23 *The figures are an aggregation of the difference between the "Order Limit Price" and the "Last Traded Price" at the time of order entry/ modification. Table 41- Trade level LTP-based analysis Scrip Expiry Buy trade start time Buy trade end t....
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.... 29-May-25 13:26:06 15:29:00 334 67 245 22 10.60 -2.40 8.20 -3.9 HEROMOTOC 0 29-May-25 13:35:59 15:25:38 375 73 265 37 41.20 -14.60 26.60 1.1 HINDALCO 29-May-25 13:26:15 15:25:53 326 78 215 33 12.85 -4.75 8.10 -7 HINDUNILVR 29-May-25 13:26:06 15:29:33 717 129 525 63 49.80 -14.50 35.30 -34.6 ICICIBANK 29-May-25 13:26:06 15:28:44 2466 270 1920 276 43.70 -40.90 2.80 8.7 INDUSINDBK 29-May-25 13:51:20 15:25:31 340 67 223 50 9.60 -5.15 4.45 -3.7 INFY 29-May-25 13:26:10 15:27:16 2085 346 1510 229 71.00 42.70 28.30 -14.2 ITC 29-May-25 13:26:06 15:29:53 812 116 601 95 11.40 -7.30 4.10 -2.95 JIOFIN 29-May-25 13:26:36 15:25:51 527 57 430 40 4.95 -2.70 2.25 1 JSWSTEEL 29-May-25 13:26:40 15:26:05 496 97 348 51 23.80 -10.70 13.10 0.7 KOTAKBANK 29-May-25 13:26:10 15:25:49 908 185 600 123 60.60 -29.60 31.00 -17.9 LT 29-May-25 13:26:40 15:29:46 1824 401 1243 180 207.00 -64.40 142.60 -126.2 M&M 29-May-25 13:26:06 15:28:23 1137 240 760 137 92.60 -45....
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....LTP* (in INR) (A) Order price based LTP impact for orders placed at LTP* (in INR) (B) Order price based LTP impact for orders placed below LTP* (in INR) (C) Order price based net LTP impact* (in INR) (A)+(B)+(C) NIFTY 29-May-25 13:44:26 15:05:35 1926 60g 1102 155 1,580.50 - -289.30 1,291.20 Table 43 - Trade level LTP-based analysis Scri p Expiry Sell trade start time Sell trade end time No. of sell trades executed No. of sell trades above LTP No. of sell trades at LTP No. of sell trades below LTP Trade price based LTP impact for trades executed above LTP* (in INR) (A) Trade price based LTP impact for trades executed at LTP* (in INR) (B Trade price based LTP impact for trades executed below LTP* (in INR) (C) Trade price based net LTP impact* (in INR) (A)+(B)+(C) Trade price based net LTP impact created by rest of the market participants [The LTP impact attributable to the rest of the market was computed by adjusting the total price movement (vis-à-vis the respective scrip), for the impact created by Jane Street's trades.] NIFT Y 29-May- 25 13:44:26 15:05:35 5213 680 3742 791 1,578.00 - -1,239.80 338.20 17.15. As can be seen f....
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....delta build-up for May 15, 2025 is placed below: 17.23. The graph above can be accessed through the QR code given below: 17.24. The analysis of delta movement on May 15, 2025, reveals a clear two-phase structure in Jane Street's exposure pattern: Phase 1: Passive Delta Through Most of the Day (09:15 to 13:00) During the majority of the trading session, the Group's net delta position remained relatively low and passive, suggesting limited directional bias. Phase 2: Aggressive Delta Build-Up in Bullish Direction (13:00 to 14:00) Beginning around 13:00, Jane Street started to rapidly accumulate bullish delta exposure, aligned with its aggressive buying in index futures and stock futures. The net NIFTY delta exposure moved from a negative level to a significantly positive value by close, supported by: * Long NIFTY Calls, and * Short Puts. Specifically, total NIFTY delta shifted from negative INR 17,125.75 Cr at open of trading session to positive INR 38,297.01 Cr at close, implying a directional swing of over INR 55,422.76 Cr. For contracts expiring on May 15 itself, delta increased by INR 49,568.52 Cr intraday, with the steepest climb occurring during the last ho....
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....p fall foul of regulation 4(2)(a) and 4(2)(e) of the PFUTP Regulations and the schemes as a whole are prima facie a fraudulent device prohibited by section 12A of the SEBI Act and regulations 3(a)-(d) and 4(1) of the PFUTP Regulations. The text of the said provisions is reproduced below: SEBI Act: Prohibition of manipulative and deceptive devices, insider trading and substantial acquisition of securities or control Section 12A. No person shall directly or indirectly- (a) use or employ, in connection with the issue, purchase or sale of any securities listed or proposed to be listed on a recognized stock exchange, any manipulative or deceptive device or contrivance in contravention of the provisions of this Act or the rules or the regulations made thereunder; (b) employ any device, scheme or artifice to defraud in connection with issue or dealing in securities which are listed or proposed to be listed on a recognised stock exchange; (c)engage in any act, practice, course of business which operates or would operate as fraud or deceit upon any person, in connection with the issue, dealing in securities which are listed or proposed to be listed on a recognised stock exchange....
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....tch of the day, as has been clearly demonstrated by data and analysis, JS Group first aggressively bought significant quantities of BANKNIFTY underlying constituent stocks and futures, temporarily pushing up or lending considerable support to the BANKNIFTY index. In the second patch of the day, as has again been demonstrated by data and analysis, JS Group was seen to practically and effectively reverse all of this buying activity from the first patch, by aggressively selling large quantities of BANKNIFTY underlying constituent stocks and futures. 21. There is little or no economic rationale to justify such large and aggressive intraday trading activity in stocks and futures on a standalone basis. In fact, given the sheer size, aggression, manner of trading and transaction costs involved, standalone, such activities could more often than not end with net trading losses. Note that across the 15 days in question, JS Group booked a total intraday trading loss of INR 199.7 crores in their activities in the BANKNIFTY constituent cash stocks and futures markets. 22. By preponderance of probability, the only reasonable explanation for the sharp buying in BANKNIFTY constituent shares and ....
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....ades towards the end of a trading session, with the specific intent of influencing the closing price of a security or index to its advantage. This practice is particularly concerning on derivative expiry days, as the closing price directly affects the settlement value of index-based contracts, thereby directly impacting payoffs for all market participants. 25. On all these three days, the JS Group was seen to be moving significant volumes (again, demonstrated clearly by percentage Gross Traded Volume, or GTV) in the underlying index constituent stocks and futures, very aggressively (as clearly demonstrated by the Last Traded Price or LTP analysis), to engineer a close in the index that was wholly favourable to their even larger effective positions in index options expiring the same day. 26. By preponderance of probability, there is no economic rationale that can account for this sudden burst of large and aggressive activity towards the close on expiry day, other than the intent to manipulate the price of securities and index benchmark, so as to engineer a favourable expiry for the even larger positions that the group was running in index options. 27. In addition, outside of the ....
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....ock exchange; (ii)short selling transactions in accordance with the framework specified by the Board; ...." 30. JSI Investments Private Limited, the JS Group entity incorporated in India, executed intra-day trades in the cash segment during the examination period. The two FPIs forming part of the JS Group took large positions in futures and options segment. The intraday cash market transactions undertaken by the Indian entity consistently ended with large losses. It appears that the incorporation of the aforesaid company in India enabled the JS Group to get around the regulatory prohibition against cash market transactions which solely applied to FPIs, and thereby execute the manipulative scheme without specifically flouting the FPI Regulations. 31. Note further that during the entire examination period across all their trades, JS Group made a total profit of INR 36,502.12 crores across all segments. Within this, it is notable that the JS Group made profits of INR 43,289.33 crores in index and stock options, while they net lost INR 7,208 crores in stock futures, lost INR 191 crores in index futures, and lost INR 288 crores in trading in cash equities segment. The trading of....
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....et have been induced to buy or sell and that no further proof in this regard is required." 35. While one is not required to demonstrate 'inducement' to prove fraud once market manipulation is established, it is evident from the volumes and number of individual PANs that have traded in index options for instance on January 17, 2024 (a BANKNIFTY expiry day) that by manipulating the index on expiry days, large number of participants are likely to have been induced to deal in index options at artificial prices. The massive profits by the JS Group in index options through these egregiously manipulative activities, to the detriment of other participants including many small retail traders, may well account for some part of the conclusions of SEBI's earlier research report dated September 23, 2024 which revealed that 93% of over 1 crore individual F&O traders incurred losses during the three years from FY22 to FY24. 36. In view of all of the above, prima facie, I find that the Entities have violated section 12A (a), (b) and(c) of the SEBI Act, 1992; regulations 3(a), (b), (c), (d), 4(1) and 4(2)(a) and (e) of the PFUTP Regulations, 2003. H. COMPUTATION OF ILLEGAL GAINS 37. The details....
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....tter of Ruchi Soya Industries Ltd.), vide order dated November 10, 2023, the Hon'ble SAT held as follows: "Explanation to Section 11B of SEBI Act as inserted vide Securities Laws (Amendment) Act, 2014, clearly provides that :- "Explanation. - For the removal of doubts, it is hereby declared that the power to issue directions under this section shall include and always be deemed to have been included the power to direct any person, who made profit or averted loss by indulging in any transaction or activity in contravention of the provisions of this Act or regulations made thereunder, to disgorge an amount equivalent to the wrongful gain made or loss averted by such contravention." 72. A reading of the aforesaid explanation shows that the law envisages disgorgement of profit / loss avoidance, made in violation of securities law, without any set-off of any expenses or loss suffered by the violator. Therefore, the contentions of the appellant that calculation of disgorgement amount should also take into consideration the amount of losses suffered by it is untenable." (emphasis supplied) 40. Therefore, when computing illegal gains made by the JS Group, I find no reason to set of....
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.... and that we are governed by the "rule of law". Fraud, deceit, artificiality, SEBI should ensure, have no place in the securities market of this country and "market security" is our motto. (iii) Securities and Exchange Board of India vs. Kishore R. Ajmera (23.02.2016 - SC) The SEBI Act and the Regulations framed thereunder are intended to protect the interests of investors in the Securities Market which has seen substantial growth in tune with the parallel developments in the economy. Investors' confidence in the Capital/ Securities Market is a reflection of the effectiveness of the regulatory mechanism in force. All such measures are intended to pre-empt manipulative trading and check all kinds of impermissible conduct in order to boost the investors' confidence in the Capital market. The primary purpose of the statutory enactments is to provide an environment conductive to increased participation and investment in the securities market which is vital to the growth and development of the economy. 45. The prima facie finding is that that BANKNIFTY index- a major index of the securities market comprising 12 stocks of India's major banks has prima facie been manipulated ....
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....ties dealing in Indian markets act collectively, and are overseen by senior personnel based overseas. 48. FPIs are permitted by law to deploy funds within specified limits and divest their holdings without any restrictions around repatriation. In the case of the JS Group entities, their core activity does not involve medium-term or long-term 'investments' as is generally understood. In fact, the average month end equity holdings of the FPIs in the JS Group, including from amongst the Entities, between January 2025 and May 2025 was INR 311 crores, which is a fraction of the quantum of enormous bursts of short-term equity-related risk that the JS Group is demonstrated to have taken on expiry days in index options. During the same period, the JS Group FPIs were instead holding on average INR 15,325 crores of India Government Securities, which served as necessary and essential cash-equivalent liquid margin for them to trade in F&O markets to the enormous extent that they did. In short, the small holdings in equity and the large holdings in cash-equivalent government bonds indicates that their business is to make profits from significant short-term High Frequency Trading (HFT) in the s....
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....Ltd has been shown to be - and are admitted to be, by the JS Group - to be an integral part of the whole of the JS Group activity. This Order has made the case that prima facie, the demonstrably large and aggressive intraday activities undertaken by the Indian entity in index constituent stocks have no economic rationale other than to manipulate the underlying indices, to benefit the significantly larger index options positions created or carried by the JS Group FPI entities. At least to the extent of this coordination across JS Group, the activities of the Indian entities are also clearly being overseen by the JS group as a whole. As noted earlier, FPIs are free to repatriate their profits and exit Indian markets at their discretion. 53. In this overall context, there is justifiable concern surrounding the enforceability of any orders of disgorgement of illegal gains, that may be passed subsequent to completion of investigation. Given the strong prima facie case made in this order, the sheer quantum of prima facie illegal gains identified in this Order, the continuing nature of the prima facie violations identified in this Order, the continuing and ongoing nature of the investiga....
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.... And Ors. 1999 (1) CLJ 396 (Guj HC). In the case of C G Power& Industrial Solutions Ltd. (SAT Appeal 413/2019), Hon'ble SAT vide its order dated October 01, 2019 noted that had SEBI failed to exercise its interim powers of impounding it would have defeated the purposes for which such powers were assigned to SEBI under the SEBI Act, 1992. The relevant extract from the said order is given below: "It was thus extremely necessary that an action on urgent basis was required to stop further defalcation/ diversion/ siphoning of the funds of the Company and to protect the interest of the investors and its shareholders and to instill confidence in the securities market. Such measures if not taken while the iron was hot would defeat the regulatory measures that has been provided to SEBI under the SEBI Act." 58. Failing to take immediate action pending further investigation, will cause irreparable damage by - (a) severely denting confidence in the securities market, (b) allowing the possibility of continued manipulation at the cost of lakhs of traders and investors and (c) rendering post investigation remedial measures, irrelevant. Balance of Convenience 59. The balance of convenience al....
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.... with section 19 of the SEBI Act hereby issue by way of this interim ex-parte order, the following directions, which shall be in force until further orders:- 62.1. The total amount of unlawful gains earned by the JS Group from the alleged violations as provided in Table 44 i.e. Rs.4,843,57,70,168/- (Four Thousand Eight Hundred Forty Three Crore Fifty Seven Lakh Seventy Thousand One Hundred and Sixty Eight Rupees only), shall be impounded, jointly and severally. Entities are directed to open escrow account in a Scheduled Commercial Bank in India to deposit jointly and severally the aforesaid amount of unlawful gains with a lien marked in favour of SEBI and the amount kept therein shall not be released without permission from SEBI. 62.2. Entities are restrained from accessing the securities market and are further prohibited from buying, selling or otherwise dealing in securities, directly or indirectly. 62.3. Banks, where Entities are holding bank accounts, are directed to ensure that no debits are made, without permission of SEBI, in respect of the bank accounts held individually or jointly by Entities, except for the purpose of complying with this Order. However, credits, if ....