Core Viewpoint - Jane Street, a US quantitative trading giant, has been banned from the Indian market by the Securities and Exchange Board of India (SEBI) after reportedly making $4.3 billion in profits over two years, with the regulator planning to confiscate its "illegal gains" of ₹48.4 billion (approximately $570 million) [1][2]. Group 1: Regulatory Actions - SEBI issued a 105-page interim order accusing Jane Street of using significant funds to manipulate futures and spot market prices on weekly index options expiry days, misleading and enticing many small retail investors [1][2]. - The interim order immediately prohibits Jane Street from entering the securities market and from directly or indirectly buying or trading securities [3]. - SEBI had previously warned Jane Street in January to avoid such trading practices, but investigations revealed that the firm continued these strategies in May, leading to severe sanctions [3]. Group 2: Market Impact - The ban is expected to have a chilling effect on the global high-frequency trading industry, with Jane Street's local trading partner, Nuvama Wealth Management, seeing a 6.8% drop in stock price following the news [1]. - Other high-frequency trading firms may temporarily reduce trading activities, potentially impacting market trading volumes in the short term [1]. - SEBI's actions reflect growing vigilance towards foreign institutional activities in India's lucrative derivatives market, especially as algorithmic trading has led to significant profits for foreign funds while retail investors have incurred substantial losses [2]. Group 3: Profitability and Market Dynamics - Jane Street reportedly earned approximately ₹365 billion ($4.3 billion) from trading in India's derivatives and spot markets between January 2023 and March 2025, making it one of the most active foreign participants in the largest derivatives market globally [2]. - SEBI's research indicates that foreign funds and local proprietary trading firms using algorithms generated $7 billion in gross profits in the 12 months ending March 2024, while retail investors lost $21 billion over the same period [2]. - SEBI has implemented several restrictions on options trading since November of the previous year to protect retail investors, including raising minimum investment limits and increasing trading volumes, which have effectively reduced trading activity this year [2].