According to Indian regulators, every trading day Jane Street would:
1) buy large volumes of stocks and/or stock futures that are part of an index tracking India’s banking sector, early in the day,
2) subsequently place large options trades, betting that the index would decline or volatility would spike later in the day, and
3) later in the day, cash out of the large long positions, dragging the index lower, making far more money on the options trades than on the long positions.
Jane Street can and likely will claim the firm was only arbitraging away pricing inefficiencies, nothing more, nothing less. It was just business as usual, etc., etc.
However, given the scale of the operation, Jane Street's actions sure look like textbook market manipulation. Calling it like I see it.
> If options & futures are more liquid than the underlying, someone will be tempted to nudge the underlying.
This is a weird statement. Why would liquidity matter here? As a point of reference there are generally two types of options: (1) options that depend directly upon the underlying, like a Tesla stock option, or (2) options that depend indirectly upon the underlying, like options on S&P 500 index futures. The liquidity in category 2 is normally tiny. Cat 1 normally has far less liquidity than the underlying.
Why is the adjective "more" important here? Even if less, the opportunity to profit is still good, assuming that one chooses the path of market manipulation.
What matters is the volume rather than the liquidity per se, but the two are generally pretty well correlated. The point is that moving a market costs money, making a trade moves the market against that trade, so even if someone is deliberately trying to move a market they'll pay more than they could ever hope to recoup. The exception is when there's a derivative market that has more volume than the underlying - in that case profitable manipulation becomes possible, as you can spend to move the underlying, losing money, but making more money on the derivatives where you'd bought the other side.
I have a suspicion this has been happening with a particular MAG7 stock these last few months, but I can't fully convince myself such a large stock can be manipulated like that.
> but I can't fully convince myself such a large stock can be manipulated like that.
I have the same initial reluctance to believe it that you do, but less so when I remind myself that we live in a world where the Social Security Administration sent out a mass email praising the passing of the "big beautiful bill".
I think our built-up understanding of how the US government functions at a baseline has not caught up to recent events. Especially in regards to how much regulatory bodies are doing their traditional jobs vs being forced to sit on their hands, or in some cases just not even existing anymore.
I assume the moron in question was using Black-Scholes or some similar formula to price those options, and refused to update their prior when they lost money day after day. This happens quite a bit in derivatives markets.
Things like Black-Scholes (using past volatility of the underlying to model the probability distribution in the future) are often used by market makers to price options, but the vanilla version never is.
Any market maker pricing options with Black-Scholes won't be a market maker for long.
Black-Scholes is just a customer-facing description of the option (i.e, it provides greeks that everyone can understand). But it isn't used as a starting point.
In practice, MM will back out what the implied volatility is from current prices. Then a stochastic volatility model is calibrated against that.
No - no market maker is using stochastic volatility. (L)SV is only used for exotics.
Market makers use a tricked out Black Scholes where the 'secret sauce' is in how you apply the chain rule when you calculate the greeks.
That's not really how it works, the market making firms would essentially have to update their vol curves in response to that signal (BS being essentially just a coordinate change from price to volatility).
Yeah that seems like it should push the premium higher. Even if it's some institution with very bad quantitative models eventually the careless put writers should run out of shares/capital to secure the puts with and get liquidated.
Yeah, I think volatility in the indian market was way too low, and Jane street just juiced it. normally that would be a losing proposition, but too many existing players were short volatility habitually… answer is not to kick Jane street out, but to enjoy the taxes Jane street pays on the gains…
Low volatility is good for everyone engaged in long term asset management. Jane Street just found a way to make everyone else less money while making a small amount for themselves.
it’s a known effect. Without going into details here, you can calculate first crossing time of a barrier in a stochastic process and observe that often the first crossing time decreases as the volatility increases. From there you can set one barrier at 0 (default) and draw your own conclusion.
When I worked at Scotttrade in 2010, I vividly remember my coworker telling me that this is what they did with the money too. I remember being surprised to hear that it flowed out in the morning and flowed back in in the evening. I never understood why that would make sense till I read your comment here.
It’s all hearsay; I’m just reporting what I heard. I don’t know the implications of it, but maybe this isn’t exactly uncommon behavior, even if it’s market manipulation.
The coworker said that the money flowed overseas too, if that helps contextualize it. No SEC, no problem, right?
Looks like Jane Street is an American firm, so, this all lines up and corroborates what you’re saying. What we’re seeing is probably the first time a government other than the US has reacted to this behavior.
I'm sure they're doing it domestically too, but due to the relative size of the markets and currency conversions what amounts to a serious disruption in the Indian stock market would just be background noise that gets ignored in a US market.
Most exchanges do not reveal counter-party information smaller than the broker level. So you wouldn't know just from looking at market activity the same person causing the large futures move was also taking large options positions.
The pattern was exploitable only on the specific days that Jane Street was allegedly manipulating. How would you have figured out, without counterparty information and before noisy sales start dragging down the index, that day X is a manipulation day?
How would you have identified that there's even such a thing as a manipulation day? Do you have a model that tells you the objectively correct number of days a non-manipulated index should be lower at close?
Seems presumptive to slander an entire nations regulatory group on a single/couple of examples. By that metric the regulatory group in the US is completely bought out since they let 2008 happen.
There's a difference between "letting" something happen and actively doing something – it shows very different intentions. The events of 2008 were also caused by a cascading system failure involving lots of different components, which are hard for a single human to fully understand. The actions of the Indian regulator in the Adani case are much simpler, and their motivation is straightforward.
One rotten regulator doesn’t mean you get to view the entire Indian regulatory environment as unreliable though. It’s the 4th/5th largest financial market in the world.
To say it plainly, SEBI has been exposed for their selective enforcement on high-profile entities. If Jane Street’s in trouble with SEBI then it’s only because they failed to secure the same privileges as Adani, or Karvy, or Ramkrishna, or Sapre, or Kamath.
> Seems presumptive to slander an entire nations regulatory group on a single/couple of examples.
How about Germany's BAFIN regulator after VW's Deiselgate or Wirecard bankruptcy? BAFIN's response was weak and slow in both cases. I am willing to slander them for "just" those two mistakes.
Examples of the 2023-2025 activities of the Indian securities regulator SEBI seem pretty relevant to current news involving SEBI here in 2025. Which is the topic of discussion. Whatever US regulators were doing in 2008 has nothing to do with this.
> However, given the scale of the operation, Jane Street's actions sure look like textbook market manipulation. Calling it like I see it.
I am unsure that the US SEC would agree with you. Buying and selling "a lot" is not clearly market manipulation in the US.
Finally, in my view the India SEBI rules are insanely vague and are written to grant a lot of leeway to the regulator.
The real problem that no one is talking about: Why is India allowing its derivatives markets to explode? An estimated NINETY percent of retail derivs "investors" (I prefer the term "gamblers") lose money in India. Lots of these loses are gains for foreign banks and hedge funds. India: What the hell are you doing!?
It’s legal gambling (same as the retail crypto and stock trades in the US). I’d expect that the legalisation of sports markets in the US has meaningfully moved exploitable punters out of the markets and into the bookmakers.
I’m not sure you are seeing it clearly..or have any trading experience whatsoever. They took substantial risk. There is always someone bigger so if they were wrong they could have been buried. Then they reversed. If there are allegations of insider trading or collusion or something else then I’m ready to pile on but I don’t see anything here.
I never quite understood why market manipulation is illegal. If market participants make emotional or irrational decisions detached from fundamentals, it should be on them.
While markets are used as a form of gambling, they also have a prosocial purpose, namely to allocate capital which improves the economy and society at large. Market manipulation increases market volatility and hence hurts efficient capital allocation, without some other benefit for the market. Besides that, it requires large amounts of capital to do, and hence can be effectively regulated.
Most of the stock market activity is secondary trading, which has little to do with allocating capital. Trading existing shares just redistributes ownership.
all that OCAML we only hire the smartest is often a veil for what is really a simpler operation that is borderline illegal. probably alot of employees dont even really understand the systems they work on
Unsurprising that unethical but "righteous" crooks like SBF and his pals came out of that place.
I imagine Jane Street will also justify this with some EA bullshit, or like Soros during the 97 crisis just say "someone would do it ; may as well me".
> Jane Street sued Millennium, Schadewald and Spottiswood in April [2024], claiming the two traders had taken an “immensely valuable” trading strategy with them. It later emerged at a court hearing that the strategy involved India options and had generated $1 billion in 2023 profits for Jane Street.
I'm amazed they managed to move firms. Suppose you know how the strategy works, and it's like what SEBI says.
1) How do you approach mlp? They don't just give you an account, they have risk officers, compliance officers, and general strategy due diligence.
2) If you manage to get past it, what then? Say mlp just asks some superficial questions and sees the dollar signs. Are you going to do the same thing? You have to think the compliance people will complain, surely?
3) So maybe the strategy they actually approached with was a parasitical strategy? If you know which stocks will be bought and sold by JS, maybe you do jump in first? Especially as you'll know particulars like when it happens, which stocks are selected, and how to spot them.
A more straightforward explanation could be that the strategy is not market manipulation by conventional SEC thinking, and that this SEBI enforcement action is an unwelcome surprise rather than “damn they got us.”
The article, and the order it's based on, indicate that Jane Street continued this trade for months after being told in February of this year that they need to stop.
I know someone that made 10 million a year for a long time on wall street. They said, generally you can assume anyone making a large amount of money is a criminal. Any large deviations from the typical returns you would see in an asset class was suspicious
Having formerly worked for an NYSE Specialist firm the role of market making is incredibly important, but many large-scale HFTs today operate in ways that either stretch the legal boundaries or exploit regulatory gaps. Many practices arguably amount to market manipulation in spirit, even if technically legal. Candidly, the regulators are either too lazy, stupid, ill equipped or uninterested to do anything about it.
SEBI’s bold move, at the expense of appearing unfriendly to foreign institutions, is commendable. I really hope that the SEC will wake up from its slumber and start investigating the tactics used by Citadel and its kind.
SEBI wasn't bold at all. They saw them do this in January, told them in February to stop, and they persisted until they finally shut the operation off. They were tipped off as early as November 2024 that this was happening. If anything SEBI was incredibly slow at reacting lol
No, India does not view things exactly the same way the west does re: the rule of law vs. institutional power. The regulator has broad authority to stop market manipulation and support from the public that we do not want HFT style manipulation skimming money from everyone else in our markets. SEBI does not need to wait for a precisely worded law for every single type of market manipulation that will take years to pass and then be sidestepped in months on some technicality. They stopped bad activity quickly only because they have some actual power to make judgements and enforce them.
Do you have any evidence of it reading like a tin foil hat? Otherwise it reads like someone doing that practice or servicing someone doing that practice and skirting responsibility
That's sort of the very definition of arbitrage in today's modern markets - its not just the text book definition of "borrow money at a low interest rate and invest at a higher interest rate": there's latency arbs, regulatory arbs, microstructure arbs... They belong to the firms who can research and benefit from them before others figure it out.
Who makes the markets in India? Is it the big Indian banks, or do these multinational trading firms act as market makers? If so, how do they distinguish between their trading and market making activities? It seems like it'd be relatively easy to rig a market (control the price) with enough capital and management over the trading.
>but many large-scale HFTs today operate in ways that either stretch the legal boundaries or exploit regulatory gaps. Many practices arguably amount to market manipulation in spirit, even if technically legal.
I hear this defence of NYSE specialists now and again. Why do other markets, including the NASDAQ, not require them? It makes little sense to me in 2025 where the vast majority of trading is electronic.
Does it really matter? I've done nothing but buy and hold at reasonable prices, and market manipulation has never affected my trades. This seems like finance bros fucking finance bros, which is solidly in the "who cares" category of my life.
Trades on this scale move the big indexes, and everybody in the market is exposed to the passive investing ETF complex.
Even if you are purely a stock picking buy and hold value investor, you will feel the reverberations. The modern market is deeply interconnected, and what Jane Street is doing here is literally moving the entire index volatility complex to pick up a modest billion a year. Let's say your small cap value stock issues some converts. A hair of that trading strategy will be embedded in the pricing model for the converts, and it will slightly change the cost of the debt for the company. Once you get out to 3rd 4th 5th order effects, it becomes a very faint influence, but when you consider that some of these market making/HFT trading practices at the core of the market are so deeply interlinked to just about everything that prints a price on a screen, it should be apparent that there is value in keeping the core areas of the market like the index volatility complex as clean as possible. Now weather Jane street's trading is just Irving price differences and improving the efficient market, or market manipulation, well that's another question, but the general rule of thumb is if you're using gigantic size to force bids and asks around, that's at high risk of being considered market manipulation that is toxic to market function.
Can you actually show that this is bad for me? It just seems like free market stuff working as intended, and the people getting fucked are other snakes trying to fuck other people over.
I showed one direct cost in the example above, by showing that the trades theoretically drag up volatility, which decreases market stability, increases the cost/risk of leverage, and lowers collateral value of equities. That will quite literally show in the pricing model of newly issued convertible bonds, which will correspondingly raise the price of debt and lower the price of equity for those that issue converts.
Yes, these are very small effects. Despite profits of 1 billion per year, trades on major index level aren't directly going to impact regular people in a highly visible way. That's arguably the insidious part, because it adds up, and occasionally this sort of thing leads to major negative financial events/crashes. The passive investing/index complex anchors the entire tradable financial system. It's massive in scale and attributes like index level volatility are innately tied to many other variables all throughout the system.
There's a good (relatively light and readable) paper called Liquidity Cascades which views the market through this lens of interconnected feedback loops which can sometimes have unintended consequences. That's another major reason you don't want HFTs and prop firms getting too crazy. It's not just about measurable impact in the real world timelines, it's also about pruning the tails in the far out distributions of the possibilities space - and the world has fat tails so it's prudent to mind the tails... The 2020 crash is a great example of a feedback loop that fed on itself until it destroyed the entire interconnected system within a few days and demanded central bank intervention (COVID was a catalyst, not a cause. The basis-trade was fragile, and a dynamic hedging feedback loop took broke the volatility complex and took out equity markets -40%, at which time the effects were most definitely felt in the real world as the Fed had to step in with 1 trillion, and they then entered a badly managed panic phase (which is on them, but still...) which very much contributed to the inflation wave and the housing price surge which locked out a generation from affordable housing).
Over the past 5 years the tail has really started to wag the dog in derivatives markets, and it's an extremely well orchestrated battlefield now. One of my acquaintances who sold a 4.5 sharpe ratio firm and clears 50k a day casually trading futures seems to spend a good amount of his day tongue-in-cheek complaining about this. As do we all. I'm a PM as well with an options book, and trade options in parallel in my personal accounts, and during the day we chat in a room and watch flow move around in index options, because the option positioning drives price. Watch the flow, reverse engineer the hedging activity, map out the implied liquidity, and join the bandwagon and pin/grind down price to these option levels. That's the game currently, and you either participate or you have negative edge. In single names as well, often the option landscape dictates price discovery.
Like you said, at first glance it's just snakes eating snakes, and arguably to a beneficial end as we all get a more efficient market at the end of the day, but is that necessarily the case?
All participants agree that there need to be some boundaries against activities like outright spoofing, submitting a fake takeover offer to major news outlets, etc. That's because it's immediately obvious that these activities detract from market function. They detract from the utility value of the market to society.
So let's take the general example of "options moving the market" on an industrial scale above, and give two more recent, bigger examples of how it can cause problems. Not criminal problems and still fairly arcane, but maybe something that shows we should be better designing our systems to manage transparently. These tidal forces of index option flows became so dominant in... I think it was Aug '24, that a large correlation bubble grew under the surface. The mechanics aren't important, but in short the mega-cap names were all perfectly anti-correlated as a result. One moved up, the other moved down, yet the indexes moved zero. Risk was building under the surface, like a roller coaster's chains clicking up a ramp. This was arguably spurred by index options overwhelming all other market forces (which ties back to the original article, except Jane would have been weaponizing these forces in an engineered way). Well this emergent mechanically driven bubble grew and grew, until voices started speaking up, and there was an almost self-fulfilling prophecy where it ballooned to absurd degrees (multi decade extremes) and then caused a small market panic event where volatility exploded and some giant mega-caps crashed for a bit.
Distill the above event, and what you're seeing is a "new" kind of boom/bust, cyclical price discovery anchored off of option flow, that I personally argue generalizes to the entire market now. And the questions to ask are questions like "is this contributing to the utility of markets? Should better guardrails be in place? Are we building systemic risk?" You know, questions regulators used to ask before they mostly went dark. In this new paradigm, most of the time options dominate price discovery, and any participant fighting these forces just gives up their money to those that are playing the game well, which reinforces the behavior. Every once in a while these hedging forces release their grip on the market, and we get some short burst of violent, pent up price discovery, before the option forces close back in and greek math like vanna and vomma dictate price discovery once again.
So the first conclusion I'd argue here is that transparent and organic price discovery is one of the major utilities offered by markets. If we're only getting organic price discovery in short violent burst every once in a blue moon, we're getting less information on what market prices infer about the real world. A parallel would be QE and painting the tape on the global bond markets, which drew an opaque veil for over a decade over a market which historically has been critically important as an input into many areas like financial risk management (and again, contributed to the horribly managed and prepared for real world inflation wave).
The second conclusion is that all of this is contributing to systemic fragility, which is an important enough real world metric to manage that it's baked into the core of the US central bank mandate, for example. A correlation bubble tanked Nvidia by 10% in a day, haha!... sure, but that isn't healthy, and roll the dice 10x, maybe 2 outcomes would be a more major crash, and sometimes these events go to very bad places, like the events that spurred the GFC (beyond the major trading institutions blowing up, there was a sort of quant collapse much like the correlation bubble above that actually was the initial spark of the GFC). It's just easier to manage problems if it's not a fiery explosion, so we should generally try and minimize nitroglycerine in financial markets...
On a more anecdotal level, these sort of extreme, late stage situations like "Jane Street weaponizes index options and pulls a billion a year out of Indian markets" are rarely good omens for healthy market function. What the market generally does is seek out weak points and incomplete models, and make it increasingly obvious via absurd situations until participants or regulators are forced to change behavior. If the system is not "working" and nobody cares, a sort of malicious nihilism creeps in to the financial space. Like the bankers laughing about MBS before the GFC after work at a bar in NYC, or prop traders saying "fuck it, let's double our size next year" while laughing about opponents getting crushed after their coordinated rush on liquidity tanks markets at the end of day like clockwork when it suits them. Most of the time financial markets reach equilibrium, but sometimes these things accelerate in odd directions, which is why we manage financial markets.
I'm not so sure some of the topics referenced above are terminating in a healthy equilibrium.
I hope mine is not managed by someone dumb enough to keep handing money over to Jane Street on such a simple scheme. If they are that dumb, I need to move my money way more than I need Jane Street punished.
For a defined benefit plan, I don’t need to care. For defined contribution plan, I care (but can usually choose investments). I personally only have 401k, IRA, and after-tax investments, no pension.
> India retail investors make up 35% of options trades. Institutions, seeking to hedge their risk or profit for their companies’ accounts, handle the rest. Regulators are alarmed that regular folk are bypassing the tried-and-true way to build wealth: buying and holding stocks and mutual funds.
> Instead they’re engaging in pure speculation. The average time an Indian trader holds an option is less than Instead they’re engaging in pure speculation. The average time an Indian trader holds an option is less than 30 minutes, according to data from mutual fund provider Axis Asset Management Co. “If you want to gamble, if you need diabetes and high blood pressure, then go into this market,” Ashwani Bhatia, a board member on the nation’s top stock market regulator, said last year.
There were fools in size in that market, and they got fleeced. What were they doing ? If anything, JS was teaching them a lesson - and now, with this action, they will be bolder in their foolishness, and someone else will separate them from their money. Index options markets are not for the unsophisticated to play in except as a casino.
India has one (https://en.wikipedia.org/wiki/Securities_Transaction_Tax). Retail investors don't choose to day trade options because of some rigorous financial analysis, so they aren't going to be discouraged by any feasible transaction tax rate.
The blog from Financial Times has a much better write-up, including a link to the official 100+ page legal order from SEBI: "The details of Jane Street’s alleged ‘sinister scheme’ in India": https://www.ft.com/content/41c4789a-afa6-462c-a6ea-9704c2ba7...
Tower got caught doing the same thing about 10 years ago. Apparently the strategy was literally called "the hammer" or something that was far too on-the-nose, but it was exploiting other strategies at the firm that bought a ton in the morning and hammered the close - "the hammer" made that leg profitable.
I assume Jane Street's version of this may have been unintentional: get your big position to do a bunch of intraday trading without worrying about being too short, then exit at the end of the day. This can work because markets tend to go up or stay flat intraday, meaning you get to use typical strategies in a jurisdiction that doesn't like when you go short via superposition. Then along the way, someone figured out this options trade and didn't realize their own behavior was influencing the price of the option (oops, I guess it wasn't superposition all along).
They probably run every sort of strategy available in various markets. The indian one they probably played a much riskier hand thinking they could get away with it.
> SEBI said that the “intensity and sheer scale” of their intervention, and the rapid reversal of their trades “without any plausible economic rationale, other than the concurrent activity in and impact on their positions in the BANKNIFTY index options markets,” was manipulative.
> "without any plausible economic rationale..."
I had a bit of a laugh at this. I thought the rationale was to fuck the counterparties as hard as possible?
It would seem like Jane Street being allowed to operate in this market is like bringing an anti-material rifle to a pillow fight.
>While these actions were not a breach of any regulation, SEBI said that the “intensity and sheer scale” of their intervention, and the rapid reversal of their trades “without any plausible economic rationale, other than the concurrent activity in and impact on their positions in the BANKNIFTY index options markets,” was manipulative.
I don't get the basis for regulatory action if they weren't in "breach of any regulation." Not a fan of financial skullduggery, but it does seem important for government agencies to play by explicit, non-arbitrary rules. (Or maybe this article just got it wrong?)
"market manipulation" in general is hard to define. The working definition in the US is something along the lines of "placing orders in the hopes that the price of the security will change in response to those orders existing, with no intention of actually executing the orders". There may be some specific regulations about specific types of market manipulation that are more clearly defined, but oftentimes not. There's lots of grey area, because the definition of market manipulation makes it seem like any order that's canceled instead of executed might be market manipulation. But in fact a majority of orders do get canceled before they trade!
So the real difference between market manipulation and a canceled order is just intention, so regulators have to make judgment calls sometimes.
> "market manipulation" in general is hard to define. The working definition in the US is something along the lines of "placing orders in the hopes that the price of the security will change in response to those orders existing, with no intention of actually executing the orders".
No, what you defined is "spoofing" - a much narrowed subcategory of market manipulation (which itself is gray, as you note). Market manipulation is broader and basically amounts to intentionally trying to affect the price of the security - even grayer.
In finance, regulation has two major flavours: prescriptive (specific) and "in spirit" (broad). US is mostly prescriptive, but the Howey test is a good example of "in spirit". Singapore is basically the inverse. Both can work well.
Honestly, there's a good case to be made that it doesn't matter. A government has every right to say "don't manipulate our market and try to fuck our economy" and not need to specify every tiny little loophole, especially to foreign companies. The fact that they must be reactive means they are always behind, and guarantees their country will be screwed and untold damage done before the problem can be addressed.
There is absolutely zero illusion that Jane Street is acting in good faith. They know what they're doing is wrong.
After all the manipulation, all the crashes, all the exploitation - maybe it is appropriate to just say "I don't care if we wrote it down, we've had enough of this shit".
Anyone have any recommendations for books/papers/articles (math heavy is fine) that give a good steel man argument for why options and derivatives are beneficial?
I can wrap my head around why/how options for physical commodities give price stability for sellers and buyers. But at first glance I struggle to see how derivatives are beneficial in the equity markets. The argument is that derivatives increase market efficiency (more accurate pricing) over what just a simple buy/sell market would give you right? But how valuable is this increased efficiency? Obviously is super valuable to the people who work in finance, but how valuable is it outside of that context?
The idea that always felt at least tentatively compelling to me is that options prices themselves allow a way for people to express their sentiments about whether a security is under-priced or over-priced — while putting money on the line to do so.
As a start, separate "derivatives" (a huge category of products) into two simpler categories: listed options and futures. For many underlyings, like interest rates or commodities, it is very difficult to trade the underlying directly, so you use derivs to trade them indirectly.
Related: My biggest concern: There should be more gatekeeping around allowing retail traders access to derivs markets due to the implied leverage in the contracts. That said I don't know a good way to gatekeep. How about an exam?
>Related: My biggest concern: There should be more gatekeeping around allowing retail traders access to derivs markets due to the implied leverage in the contracts. That said I don't know a good way to gatekeep. How about an exam?
Puts let you hedge long positions, calls let you hedge short positions. Without that you'd have to liquidate much sooner so there would be more volatility.
More abstractly derivatives let traders in one asset pay premia to offload risk to other traders who are more able to absorb it. This way everyone has what they want and the market functions more efficiently. It's very similar to insurance (and you can actually model insurance like a portfolio of long/short put+call options with a probabilistic (event dependent) multiplier.)
They allow for more flexible risk management (ie hedging), especially when dealing with margins or not very liquid tickers because they give you exposure to 100 units (%δ * 100) without requiring you to buy or sell them.
If you own stock, you can sell calls against it — especially if premium is high to hedge against drops. If you are short stock, you can buy calls to hedge against short term movement.
I personally don’t think they improve price discovery because market microstructure through options and mm exposure affect pricing.
> The alternative claim - that large traders do not make decisions based on how their activity will move the market, is of course absurd.
No, that's de riugeur for any large firm. You or I can buy a stock without changing the market, but if a bank or hedge fund wants to buy or sell millions of dollars of a stock they very much have to worry about execution. The price they receive for a trade will be worse than the market price, simply because the price will move once it's clear that someone is making a large block trade.
This is also why hedge funds worry about their 'alpha'. Even when they have found a good basis for a trade (e.g. an as-yet unexploited correlation), taking a position to profit on that trade moves prices in ways that eliminate that edge. That's the efficient market hypothesis in action.
The very odd thing here is the allegation that Jane Street could make perfectly ordinary market transactions in liquid securities and somehow have the market move with their net position. This is extremely unusual.
In this case it was Millenium ratting out on Jane Street (edit - other way around), but now the entire HFT (Edit: hedge funds. Thanks for the callout avvt4avaw) industry is under extreme scrutiny by SEBI as a result [0]
Yes as presented this behavior is clearly illegal. The next interesting question is if such an obviously illegal strategy was in use by JS, and they also produced the likes of SBF&co, what other related manipulation activity are they partaking in?
This behavior became common in the Indian market after the newer HFTs (Edit: hedge funds. Thanks for the callout avvt4avaw) in the Indian market like Millenium, Jane Street, Citadel, and others setup shop, and explains a LOT of the market weirdness that happened last year. DE Shaw India has been a much smarter player in Indian equities.
Jane Street's kvetching about Millenium showed the spotlight and now everyone will be getting the hammer ("iss hamam mein sabh nange hain"). Jane Street was also dumb enough to do this during the General Election, so now Indian regulators have to do something. This plus the Adani prosecution is a quick win to restore confidence in SEBI.
This is a very weird use of terminology. None of Jane Street, Millennium or Citadel are High Frequency Traders (HFTs). Jane Street is a prop trading firm who engages in market making, but is not primarily known for HFT - they are grey box (i.e. human-in-the-loop) which on the spectrum of market making strategies, is pretty much the opposite end from HFTs. Other firms in this bracket include SIG and DRW.
Millennium and Citadel are both hedge funds, who do not engage in market making at all. They are most similar to other multi-strategy hedge funds like Balyasny or Point72.
You may be thinking of Citadel Securities, who are a market making firm and do engage in high frequency trading. Other large and well known HFT firms include Hudson River Trading, Tower Research, Jump Trading, Virtu, IMC and Optiver.
I'm not a domain expert in this space, and have used HFT to refer to these firms simply due to their technical trading nature. I appreciate the explanation! The closest I've ever been to this industry was bombing an FPGA optimization interview at Citadel eons ago, but I also don't like humidity or snow for 9 months in a year, but I do like Malort and Hyde Park - such is life.
Jokes aside, I appreciate callouts and/or corrections!
>This behavior became common in the Indian market after the newer HFTs (Edit: hedge funds. Thanks for the callout avvt4avaw)
You weren't wrong. All market making is now electronic and all electronic market making is done at a speed only available to HFT firms, so the previous comment reply to yours saying that Jane Street is a market maker but not HFT, is more than a little silly. The Citadel being referred to here in this reporting is also the market making (hence HFT) one, so their attempted correction on that made little sense either.
Oh, well, I'm not a domain expert in this space. I'm a VC - my job is to be confidently wrong ;). The closest I've ever been to this industry was bombing an FPGA optimization interview at Citadel eons ago, but I also don't like humidity or snow for 9 months in a year, but I do like Malort and Hyde Park - such is life.
All I know is a set of firms like Millenium, Citadel, Jane Street, etc ki gaand phatne wale hain. You don't pull these kinds of shenanigans during or in the run-up to General Elections, Bihar Assembly Elections, or UP Assembly Elections. People have been screwed over for less.
I’m speaking broader than that. It’s impossible to move a lot of money without secondary effects. Any pretense that does not give you advantages is misleading.
Any pretense that does not give you disadvantages is misleading. Small shops and retail don't have to worry about e.g. slippage like the big guys do when taking positions. Big shops can work out custom instruments sometimes but on the other hand they also need them a lot more, as trying to pick up adequate hedging in derivatives mkts could wind up with yet more slippage. Etc.
Yup Jim Simons from the Renaissance hedge fund fame kept saying that: there are a shitload of (legal btw) strategies that do work with smallish amounts but they stop working once you get big.
I think you might be right. It was such a juvenile and petty squabble.
And on top of that - don't make such squabbles public during a GENERAL ELECTION, thus forcing politicans to cleanup shop.
Same thing happened to Adani Group, as their scandal hit during the run up of the 2024 GE.
Now both Adani Group and the HFT industry are under severe scrutiny due to the upcoming Bihar Elections, which is used a sandbox to test messaging by the opposition and incumbents in preparation of the next General Election and other state elections.
As these other countries become more wealthy and lucrative in and of themselves due to the sheer industriousness of their citizenry rather than trying to “extract value” through shameless and country-destroying corruptive exploitation, we won’t have much of a reason to look up to places like Jane Street. I don’t particularly care what the interns have wrought because quite frankly the company is a parasitic entity that should not be looked up to as an example, but as something to immediately investigate as a nest of illegal activity that leaves the country worse off.
Am I surprised they were cut off? No, not at all. They should be cut off in the West altogether.
I am shocked by the size of the retail index options traders. They are selling put options naked without any underlying hedges and getting fleeced as a result.
Two strategies are detailed with trades:
1) expiry day price discrepancies between index options and underlying
2) expiry day painting the close
Selling naked puts doesn’t seem particularly outrageous. About half the time that I want to buy a position, I’ll sell a series of put options just OoM until I get assigned the shares I want, collecting small premium along the way.
My “hedge” in this case is that I want to own the shares. (I’m short vs where I want to be.)
Futures index option traders are not looking to get assigned a basket of hundreds of stocks. They are cash settled, for one, so all that gets assigned is a profit or loss.
My understanding is that it is the closest to legal gambling available in India and so the local market for gambling type behavior inflates the Indian options volume.
Ah yes, Adani Group is running a totally legit operation that just so happens to have a symbiotic relationship with the PM of India while posting +2000% gains in <2 years. Hindenburg's analysis? Slander!
But Jane Street? Running the most heinous of illegal operations. A clear example of manipulating India's markets. Ok, sure.
SEBI is prosecuting Adani now [0] (edit: correct link [1] - they are going after Adani Group's holding funds in Marutius). The previous chairperson of SEBI was unceremoniously canned this March for this incident and the Adani incident, and the current chairperson (Tuhin Kanta Pandey) cleaned up Indian SoEs during their privatization during Modi 2.
Edit: cannot reply below
Indian regulators won't settle with Adani Group. They have become a political liability due to how slapshot they played AND because the Bihar Elections are coming up, so skinning some goats (balli ka bakra) is a quick win - the RJD, INC, and TMC attacks on Modi+Adani are landing in Bihar and much of the rest of India.
Every Indian government does this - such as Kingfisher Group, Sahara Group, Gitanjali Group, etc.
Treat it the same way as Truong My Lan's case in Vietnam and Wanda Group's case in China.
> Adani, the nephew of Gautam Adani, was sent a notice by the Securities and Exchange Board of India (SEBI) last year which alleged he shared information about Adani Green's (ADNA.NS), 2021 acquisition of SoftBank-backed SB Energy Holdings with his brother-in-law before the deal was announced, according to a source and the document.
Some Adani relative is getting a slap on the wrist for a $100k insider trading violation. This has nothing to do with the main issues raised by Hindenburg.
Indeed. Seems political establishment and regulators were waiting to find some small piece to sacrifice and now that they have found one, "rule of law will be applied to fullest extent".
Unlike corruption etc, rule of law really is best way to reward your favorites and punish your adversaries thoroughly.
Other way around. Lower rungs at AGMUT roles are the most vocal about abuses of power becuase they want to become a joint secretaries in 20 years. It's once your role approaches cabinet appointment level that stuff gets dicey. Of course, Pandeyji is fairly clean and has a reputation as an enforcer in Odisha and later during the cleanup in the run-up of privatization. It's going to be mid-level leadership that will push back.
Like I said before, treat this the same way you would similar news in Vietnam, China, Russia, or Romania.
Take the example of spoofing. A trader puts in a 10mm order on the bid in futures, and then pulls it once price gets near him. He then develops an automated trading strategy that capitalizes on the volatility spike in the options market when this bid hits the tape.
This example has two common characteristics of market manipulation - using size to push markets in a direction for personal benefit, and putting the bid in with sole intent to push the market, as in there was never any desire to see the order actually get filled.
If Jane Street was selling options that were only profitable within the context of a strategy that involved pushing massive size into the market near market close and forcing price down, that is likely categorized as manipulation. On the other hand, if they were moving inventory and in the process moved price, and they tweak their trading strategies to further profit from this, that's a more arguable position.
market manipulation is when you place/cancel an order with the intention that the market will react to you in a specific way, with no intention of that order actually executing.
cs702 – 6 hours ago
1) buy large volumes of stocks and/or stock futures that are part of an index tracking India’s banking sector, early in the day,
2) subsequently place large options trades, betting that the index would decline or volatility would spike later in the day, and
3) later in the day, cash out of the large long positions, dragging the index lower, making far more money on the options trades than on the long positions.
Jane Street can and likely will claim the firm was only arbitraging away pricing inefficiencies, nothing more, nothing less. It was just business as usual, etc., etc.
However, given the scale of the operation, Jane Street's actions sure look like textbook market manipulation. Calling it like I see it.
conditionnumber – 4 hours ago
If options & futures are more liquid than the underlying, someone will be tempted to nudge the underlying.
Bond ETFs and their options chains seem like another locale where this could happen.
throwaway2037 – 2 hours ago
Why is the adjective "more" important here? Even if less, the opportunity to profit is still good, assuming that one chooses the path of market manipulation.
lmm – 2 hours ago
PartiallyTyped – 1 hour ago
toomuchtodo – 56 minutes ago
https://www.nasdaq.com/articles/what-gamma-squeeze-understan...
ivape – 4 hours ago
pclmulqdq – 3 hours ago
throwaway2037 – 2 hours ago
pclmulqdq – 1 hour ago
artemisyna – 3 hours ago
georgemcbay – 54 minutes ago
I have the same initial reluctance to believe it that you do, but less so when I remind myself that we live in a world where the Social Security Administration sent out a mass email praising the passing of the "big beautiful bill".
I think our built-up understanding of how the US government functions at a baseline has not caught up to recent events. Especially in regards to how much regulatory bodies are doing their traditional jobs vs being forced to sit on their hands, or in some cases just not even existing anymore.
jeromegv – 16 minutes ago
naveen99 – 6 hours ago
pclmulqdq – 4 hours ago
rybosworld – 3 hours ago
pclmulqdq – 3 hours ago
rybosworld – 3 hours ago
Black-Scholes is just a customer-facing description of the option (i.e, it provides greeks that everyone can understand). But it isn't used as a starting point.
In practice, MM will back out what the implied volatility is from current prices. Then a stochastic volatility model is calibrated against that.
https://en.wikipedia.org/wiki/Stochastic_volatility
mcakes – 20 minutes ago
isatty – 4 hours ago
kragen – 3 hours ago
andrepd – 4 hours ago
msgodel – 4 hours ago
throwaway2037 – 2 hours ago
lopatin – 5 hours ago
naveen99 – 5 hours ago
lumost – 5 hours ago
MichaelZuo – 5 hours ago
According to who?
There are plenty of pension funds nowdays that have people specialized in picking up mid sized companies after big drops.
mrcode007 – 4 hours ago
steveBK123 – 5 hours ago
sillysaurusx – 1 hour ago
It’s all hearsay; I’m just reporting what I heard. I don’t know the implications of it, but maybe this isn’t exactly uncommon behavior, even if it’s market manipulation.
The coworker said that the money flowed overseas too, if that helps contextualize it. No SEC, no problem, right?
Looks like Jane Street is an American firm, so, this all lines up and corroborates what you’re saying. What we’re seeing is probably the first time a government other than the US has reacted to this behavior.
hotep99 – 1 hour ago
ladberg – 40 minutes ago
Horffupolde – 6 hours ago
posnet – 4 hours ago
londons_explore – 4 hours ago
jayd16 – 1 hour ago
efavdb – 3 hours ago
SpicyLemonZest – 34 minutes ago
How would you have identified that there's even such a thing as a manipulation day? Do you have a model that tells you the objectively correct number of days a non-manipulated index should be lower at close?
0xDEAFBEAD – 1 hour ago
steveBK123 – 5 hours ago
Horffupolde – 5 hours ago
anticensor – 5 hours ago
Horffupolde – 5 hours ago
cwmoore – 5 hours ago
Den_VR – 5 hours ago
People may recall the matter involving Adani Group. https://hindenburgresearch.com/adani-update-sebi/
dyauspitr – 5 hours ago
sealeck – 5 hours ago
dyauspitr – 5 hours ago
Den_VR – 5 hours ago
To say it plainly, SEBI has been exposed for their selective enforcement on high-profile entities. If Jane Street’s in trouble with SEBI then it’s only because they failed to secure the same privileges as Adani, or Karvy, or Ramkrishna, or Sapre, or Kamath.
fastball – 2 hours ago
throwaway2037 – 2 hours ago
Den_VR – 5 hours ago
Examples of the 2023-2025 activities of the Indian securities regulator SEBI seem pretty relevant to current news involving SEBI here in 2025. Which is the topic of discussion. Whatever US regulators were doing in 2008 has nothing to do with this.
CPLX – 4 hours ago
Not sure that makes the point you think it makes.
throwaway2037 – 2 hours ago
Finally, in my view the India SEBI rules are insanely vague and are written to grant a lot of leeway to the regulator.
The real problem that no one is talking about: Why is India allowing its derivatives markets to explode? An estimated NINETY percent of retail derivs "investors" (I prefer the term "gamblers") lose money in India. Lots of these loses are gains for foreign banks and hedge funds. India: What the hell are you doing!?
adw – 57 minutes ago
futevolei – 3 hours ago
tyre – 2 hours ago
- They were taking a substantial risk.
- They were manipulating the market.
olalonde – 1 hour ago
f33d5173 – 1 hour ago
olalonde – 50 minutes ago
dgfitz – 2 hours ago
stefan_ – 6 hours ago
cs702 – 6 hours ago
whatever1 – 6 hours ago
ldjkfkdsjnv – 4 hours ago
senderista – 1 hour ago
theirjehdirhdij – 4 hours ago
I imagine Jane Street will also justify this with some EA bullshit, or like Soros during the 97 crisis just say "someone would do it ; may as well me".
walterbell – 6 hours ago
> Jane Street sued Millennium, Schadewald and Spottiswood in April [2024], claiming the two traders had taken an “immensely valuable” trading strategy with them. It later emerged at a court hearing that the strategy involved India options and had generated $1 billion in 2023 profits for Jane Street.
lordnacho – 5 hours ago
1) How do you approach mlp? They don't just give you an account, they have risk officers, compliance officers, and general strategy due diligence.
2) If you manage to get past it, what then? Say mlp just asks some superficial questions and sees the dollar signs. Are you going to do the same thing? You have to think the compliance people will complain, surely?
3) So maybe the strategy they actually approached with was a parasitical strategy? If you know which stocks will be bought and sold by JS, maybe you do jump in first? Especially as you'll know particulars like when it happens, which stocks are selected, and how to spot them.
pgwhalen – 1 hour ago
SpicyLemonZest – 49 minutes ago
brcmthrowaway – 6 hours ago
jxf – 3 hours ago
esseph – 1 hour ago
CPLX – 4 hours ago
I wonder to what degree the lawsuit is what got this on the radar of the Indian authorities. Maybe they should have listened to Stringer Bell.
ldjkfkdsjnv – 4 hours ago
balderdash – 6 hours ago
sheepscreek – 5 hours ago
jterrys – 53 minutes ago
benced – 3 hours ago
zaptheimpaler – 3 hours ago
msgodel – 3 hours ago
Which is fine, that's how the Indians prefer it. Not every place needs to be the same.
pgwhalen – 1 hour ago
throwaway2037 – 2 hours ago
whattheheckheck – 1 hour ago
jojobas – 2 hours ago
anonu – 6 hours ago
RandomThoughts3 – 6 hours ago
That’s absolutely not the textbook definition of arbitrage.
Arbitrage is buy something somewhere at a price and resell it in a different market at a higher price. It’s just price arbitration hence the name.
There are no other kind of arbitrage implied when people talk about arbitrage. That’s what the word means.
state_less – 6 hours ago
gruez – 4 hours ago
Can you expand on this?
throwaway2037 – 2 hours ago
thinkingtoilet – 4 hours ago
Or it's their friends doing it and they're not uninterested, they're very interested in ensuring it continues.
zeroCalories – 6 hours ago
Fade_Dance – 5 hours ago
Even if you are purely a stock picking buy and hold value investor, you will feel the reverberations. The modern market is deeply interconnected, and what Jane Street is doing here is literally moving the entire index volatility complex to pick up a modest billion a year. Let's say your small cap value stock issues some converts. A hair of that trading strategy will be embedded in the pricing model for the converts, and it will slightly change the cost of the debt for the company. Once you get out to 3rd 4th 5th order effects, it becomes a very faint influence, but when you consider that some of these market making/HFT trading practices at the core of the market are so deeply interlinked to just about everything that prints a price on a screen, it should be apparent that there is value in keeping the core areas of the market like the index volatility complex as clean as possible. Now weather Jane street's trading is just Irving price differences and improving the efficient market, or market manipulation, well that's another question, but the general rule of thumb is if you're using gigantic size to force bids and asks around, that's at high risk of being considered market manipulation that is toxic to market function.
zeroCalories – 3 hours ago
Fade_Dance – 45 minutes ago
Yes, these are very small effects. Despite profits of 1 billion per year, trades on major index level aren't directly going to impact regular people in a highly visible way. That's arguably the insidious part, because it adds up, and occasionally this sort of thing leads to major negative financial events/crashes. The passive investing/index complex anchors the entire tradable financial system. It's massive in scale and attributes like index level volatility are innately tied to many other variables all throughout the system.
There's a good (relatively light and readable) paper called Liquidity Cascades which views the market through this lens of interconnected feedback loops which can sometimes have unintended consequences. That's another major reason you don't want HFTs and prop firms getting too crazy. It's not just about measurable impact in the real world timelines, it's also about pruning the tails in the far out distributions of the possibilities space - and the world has fat tails so it's prudent to mind the tails... The 2020 crash is a great example of a feedback loop that fed on itself until it destroyed the entire interconnected system within a few days and demanded central bank intervention (COVID was a catalyst, not a cause. The basis-trade was fragile, and a dynamic hedging feedback loop took broke the volatility complex and took out equity markets -40%, at which time the effects were most definitely felt in the real world as the Fed had to step in with 1 trillion, and they then entered a badly managed panic phase (which is on them, but still...) which very much contributed to the inflation wave and the housing price surge which locked out a generation from affordable housing).
Over the past 5 years the tail has really started to wag the dog in derivatives markets, and it's an extremely well orchestrated battlefield now. One of my acquaintances who sold a 4.5 sharpe ratio firm and clears 50k a day casually trading futures seems to spend a good amount of his day tongue-in-cheek complaining about this. As do we all. I'm a PM as well with an options book, and trade options in parallel in my personal accounts, and during the day we chat in a room and watch flow move around in index options, because the option positioning drives price. Watch the flow, reverse engineer the hedging activity, map out the implied liquidity, and join the bandwagon and pin/grind down price to these option levels. That's the game currently, and you either participate or you have negative edge. In single names as well, often the option landscape dictates price discovery.
Like you said, at first glance it's just snakes eating snakes, and arguably to a beneficial end as we all get a more efficient market at the end of the day, but is that necessarily the case?
All participants agree that there need to be some boundaries against activities like outright spoofing, submitting a fake takeover offer to major news outlets, etc. That's because it's immediately obvious that these activities detract from market function. They detract from the utility value of the market to society.
So let's take the general example of "options moving the market" on an industrial scale above, and give two more recent, bigger examples of how it can cause problems. Not criminal problems and still fairly arcane, but maybe something that shows we should be better designing our systems to manage transparently. These tidal forces of index option flows became so dominant in... I think it was Aug '24, that a large correlation bubble grew under the surface. The mechanics aren't important, but in short the mega-cap names were all perfectly anti-correlated as a result. One moved up, the other moved down, yet the indexes moved zero. Risk was building under the surface, like a roller coaster's chains clicking up a ramp. This was arguably spurred by index options overwhelming all other market forces (which ties back to the original article, except Jane would have been weaponizing these forces in an engineered way). Well this emergent mechanically driven bubble grew and grew, until voices started speaking up, and there was an almost self-fulfilling prophecy where it ballooned to absurd degrees (multi decade extremes) and then caused a small market panic event where volatility exploded and some giant mega-caps crashed for a bit.
Distill the above event, and what you're seeing is a "new" kind of boom/bust, cyclical price discovery anchored off of option flow, that I personally argue generalizes to the entire market now. And the questions to ask are questions like "is this contributing to the utility of markets? Should better guardrails be in place? Are we building systemic risk?" You know, questions regulators used to ask before they mostly went dark. In this new paradigm, most of the time options dominate price discovery, and any participant fighting these forces just gives up their money to those that are playing the game well, which reinforces the behavior. Every once in a while these hedging forces release their grip on the market, and we get some short burst of violent, pent up price discovery, before the option forces close back in and greek math like vanna and vomma dictate price discovery once again.
So the first conclusion I'd argue here is that transparent and organic price discovery is one of the major utilities offered by markets. If we're only getting organic price discovery in short violent burst every once in a blue moon, we're getting less information on what market prices infer about the real world. A parallel would be QE and painting the tape on the global bond markets, which drew an opaque veil for over a decade over a market which historically has been critically important as an input into many areas like financial risk management (and again, contributed to the horribly managed and prepared for real world inflation wave).
The second conclusion is that all of this is contributing to systemic fragility, which is an important enough real world metric to manage that it's baked into the core of the US central bank mandate, for example. A correlation bubble tanked Nvidia by 10% in a day, haha!... sure, but that isn't healthy, and roll the dice 10x, maybe 2 outcomes would be a more major crash, and sometimes these events go to very bad places, like the events that spurred the GFC (beyond the major trading institutions blowing up, there was a sort of quant collapse much like the correlation bubble above that actually was the initial spark of the GFC). It's just easier to manage problems if it's not a fiery explosion, so we should generally try and minimize nitroglycerine in financial markets...
On a more anecdotal level, these sort of extreme, late stage situations like "Jane Street weaponizes index options and pulls a billion a year out of Indian markets" are rarely good omens for healthy market function. What the market generally does is seek out weak points and incomplete models, and make it increasingly obvious via absurd situations until participants or regulators are forced to change behavior. If the system is not "working" and nobody cares, a sort of malicious nihilism creeps in to the financial space. Like the bankers laughing about MBS before the GFC after work at a bar in NYC, or prop traders saying "fuck it, let's double our size next year" while laughing about opponents getting crushed after their coordinated rush on liquidity tanks markets at the end of day like clockwork when it suits them. Most of the time financial markets reach equilibrium, but sometimes these things accelerate in odd directions, which is why we manage financial markets.
I'm not so sure some of the topics referenced above are terminating in a healthy equilibrium.
ycombinatrix – 6 hours ago
throwaway2037 – 2 hours ago
esseph – 1 hour ago
sokoloff – 5 hours ago
throwaway2037 – 2 hours ago
ycombinatrix – 5 hours ago
sokoloff – 5 hours ago
zeroCalories – 4 hours ago
triceratops – 3 hours ago
> not a HFT or options trading playground
Do HFTs not trade stocks and bonds? Or options on them?
catlover76 – 3 hours ago
miohtama – 5 hours ago
> India retail investors make up 35% of options trades. Institutions, seeking to hedge their risk or profit for their companies’ accounts, handle the rest. Regulators are alarmed that regular folk are bypassing the tried-and-true way to build wealth: buying and holding stocks and mutual funds.
> Instead they’re engaging in pure speculation. The average time an Indian trader holds an option is less than Instead they’re engaging in pure speculation. The average time an Indian trader holds an option is less than 30 minutes, according to data from mutual fund provider Axis Asset Management Co. “If you want to gamble, if you need diabetes and high blood pressure, then go into this market,” Ashwani Bhatia, a board member on the nation’s top stock market regulator, said last year.
https://economictimes.indiatimes.com/markets/options/indias-...
bwfan123 – 2 hours ago
0xDEAFBEAD – 1 hour ago
SpicyLemonZest – 22 minutes ago
throwaway2037 – 2 hours ago
pgwhalen – 1 hour ago
leoh – 1 hour ago
Non-paywalled FT article: https://archive.is/2025.07.06-105811/https://www.ft.com/cont...
landl0rd – 6 hours ago
pclmulqdq – 5 hours ago
I assume Jane Street's version of this may have been unintentional: get your big position to do a bunch of intraday trading without worrying about being too short, then exit at the end of the day. This can work because markets tend to go up or stay flat intraday, meaning you get to use typical strategies in a jurisdiction that doesn't like when you go short via superposition. Then along the way, someone figured out this options trade and didn't realize their own behavior was influencing the price of the option (oops, I guess it wasn't superposition all along).
alpark3 – 4 hours ago
Jane Street's version of this was absolutely intentional.
[1] https://www.reuters.com/article/business/high-frequency-trad...
pclmulqdq – 3 hours ago
https://www.cftc.gov/PressRoom/PressReleases/8074-19
dmix – 5 hours ago
bob1029 – 2 hours ago
> "without any plausible economic rationale..."
I had a bit of a laugh at this. I thought the rationale was to fuck the counterparties as hard as possible?
It would seem like Jane Street being allowed to operate in this market is like bringing an anti-material rifle to a pillow fight.
thedailymail – 5 hours ago
I don't get the basis for regulatory action if they weren't in "breach of any regulation." Not a fan of financial skullduggery, but it does seem important for government agencies to play by explicit, non-arbitrary rules. (Or maybe this article just got it wrong?)
markasoftware – 5 hours ago
So the real difference between market manipulation and a canceled order is just intention, so regulators have to make judgment calls sometimes.
pgwhalen – 1 hour ago
No, what you defined is "spoofing" - a much narrowed subcategory of market manipulation (which itself is gray, as you note). Market manipulation is broader and basically amounts to intentionally trying to affect the price of the security - even grayer.
throwaway2037 – 1 hour ago
Tadpole9181 – 4 hours ago
There is absolutely zero illusion that Jane Street is acting in good faith. They know what they're doing is wrong.
After all the manipulation, all the crashes, all the exploitation - maybe it is appropriate to just say "I don't care if we wrote it down, we've had enough of this shit".
throwaway2037 – 1 hour ago
wfleming – 5 hours ago
MichaelNolan – 3 hours ago
I can wrap my head around why/how options for physical commodities give price stability for sellers and buyers. But at first glance I struggle to see how derivatives are beneficial in the equity markets. The argument is that derivatives increase market efficiency (more accurate pricing) over what just a simple buy/sell market would give you right? But how valuable is this increased efficiency? Obviously is super valuable to the people who work in finance, but how valuable is it outside of that context?
leoh – 1 hour ago
throwaway2037 – 1 hour ago
Related: My biggest concern: There should be more gatekeeping around allowing retail traders access to derivs markets due to the implied leverage in the contracts. That said I don't know a good way to gatekeep. How about an exam?
0xDEAFBEAD – 1 hour ago
In the US, investors need approval to trade options. https://www.investor.gov/introduction-investing/general-reso...
msgodel – 3 hours ago
More abstractly derivatives let traders in one asset pay premia to offload risk to other traders who are more able to absorb it. This way everyone has what they want and the market functions more efficiently. It's very similar to insurance (and you can actually model insurance like a portfolio of long/short put+call options with a probabilistic (event dependent) multiplier.)
PartiallyTyped – 2 hours ago
If you own stock, you can sell calls against it — especially if premium is high to hedge against drops. If you are short stock, you can buy calls to hedge against short term movement.
I personally don’t think they improve price discovery because market microstructure through options and mm exposure affect pricing.
monkeyelite – 7 hours ago
It’s just political. Who is allowed to manipulate and who pays their dues to be able to.
Majromax – 3 hours ago
No, that's de riugeur for any large firm. You or I can buy a stock without changing the market, but if a bank or hedge fund wants to buy or sell millions of dollars of a stock they very much have to worry about execution. The price they receive for a trade will be worse than the market price, simply because the price will move once it's clear that someone is making a large block trade.
This is also why hedge funds worry about their 'alpha'. Even when they have found a good basis for a trade (e.g. an as-yet unexploited correlation), taking a position to profit on that trade moves prices in ways that eliminate that edge. That's the efficient market hypothesis in action.
The very odd thing here is the allegation that Jane Street could make perfectly ordinary market transactions in liquid securities and somehow have the market move with their net position. This is extremely unusual.
alephnerd – 7 hours ago
In this case it was Millenium ratting out on Jane Street (edit - other way around), but now the entire HFT (Edit: hedge funds. Thanks for the callout avvt4avaw) industry is under extreme scrutiny by SEBI as a result [0]
[0] - https://www.sebi.gov.in/enforcement/orders/jul-2025/interim-...
steveBK123 – 6 hours ago
alephnerd – 6 hours ago
Jane Street's kvetching about Millenium showed the spotlight and now everyone will be getting the hammer ("iss hamam mein sabh nange hain"). Jane Street was also dumb enough to do this during the General Election, so now Indian regulators have to do something. This plus the Adani prosecution is a quick win to restore confidence in SEBI.
avvt4avaw – 6 hours ago
Millennium and Citadel are both hedge funds, who do not engage in market making at all. They are most similar to other multi-strategy hedge funds like Balyasny or Point72.
You may be thinking of Citadel Securities, who are a market making firm and do engage in high frequency trading. Other large and well known HFT firms include Hudson River Trading, Tower Research, Jump Trading, Virtu, IMC and Optiver.
alephnerd – 1 hour ago
Jokes aside, I appreciate callouts and/or corrections!
TeaBrain – 1 hour ago
You weren't wrong. All market making is now electronic and all electronic market making is done at a speed only available to HFT firms, so the previous comment reply to yours saying that Jane Street is a market maker but not HFT, is more than a little silly. The Citadel being referred to here in this reporting is also the market making (hence HFT) one, so their attempted correction on that made little sense either.
alephnerd – 1 hour ago
All I know is a set of firms like Millenium, Citadel, Jane Street, etc ki gaand phatne wale hain. You don't pull these kinds of shenanigans during or in the run-up to General Elections, Bihar Assembly Elections, or UP Assembly Elections. People have been screwed over for less.
monkeyelite – 6 hours ago
landl0rd – 6 hours ago
monkeyelite – 4 hours ago
TacticalCoder – 5 hours ago
anonu – 6 hours ago
alephnerd – 6 hours ago
And on top of that - don't make such squabbles public during a GENERAL ELECTION, thus forcing politicans to cleanup shop.
Same thing happened to Adani Group, as their scandal hit during the run up of the 2024 GE.
Now both Adani Group and the HFT industry are under severe scrutiny due to the upcoming Bihar Elections, which is used a sandbox to test messaging by the opposition and incumbents in preparation of the next General Election and other state elections.
brogdan – 22 minutes ago
Am I surprised they were cut off? No, not at all. They should be cut off in the West altogether.
neximo64 – 4 hours ago
randall – 4 hours ago
bwfan123 – 13 hours ago
Two strategies are detailed with trades: 1) expiry day price discrepancies between index options and underlying 2) expiry day painting the close
sokoloff – 5 hours ago
My “hedge” in this case is that I want to own the shares. (I’m short vs where I want to be.)
Fade_Dance – 5 hours ago
maest – 6 hours ago
steveBK123 – 7 hours ago
kragen – 3 hours ago
> While these actions were not a breach of any regulation,
I guess this is why you shouldn't do business in India: you can get retroactively punished for breaking rules the regulators wish they had made.
SeanAnderson – 7 hours ago
But Jane Street? Running the most heinous of illegal operations. A clear example of manipulating India's markets. Ok, sure.
alephnerd – 6 hours ago
Edit: cannot reply below
Indian regulators won't settle with Adani Group. They have become a political liability due to how slapshot they played AND because the Bihar Elections are coming up, so skinning some goats (balli ka bakra) is a quick win - the RJD, INC, and TMC attacks on Modi+Adani are landing in Bihar and much of the rest of India.
Every Indian government does this - such as Kingfisher Group, Sahara Group, Gitanjali Group, etc.
Treat it the same way as Truong My Lan's case in Vietnam and Wanda Group's case in China.
[0] - https://www.reuters.com/sustainability/boards-policy-regulat...
[1] - https://www.reuters.com/sustainability/boards-policy-regulat...
pseudo0 – 6 hours ago
> Adani, the nephew of Gautam Adani, was sent a notice by the Securities and Exchange Board of India (SEBI) last year which alleged he shared information about Adani Green's (ADNA.NS), 2021 acquisition of SoftBank-backed SB Energy Holdings with his brother-in-law before the deal was announced, according to a source and the document.
Some Adani relative is getting a slap on the wrist for a $100k insider trading violation. This has nothing to do with the main issues raised by Hindenburg.
geodel – 5 hours ago
Unlike corruption etc, rule of law really is best way to reward your favorites and punish your adversaries thoroughly.
senderista – 49 minutes ago
alephnerd – 1 hour ago
As the classic Indian maxim states - "Jiski laathi, uski bhains".
alephnerd – 46 minutes ago
> Some Adani relative
Heir apparent, who is now open to getting FIRs filed against him.
lazide – 6 hours ago
alephnerd – 43 minutes ago
Like I said before, treat this the same way you would similar news in Vietnam, China, Russia, or Romania.
SeanAnderson – 6 hours ago
ericmay – 6 hours ago
Zacharias030 – 5 hours ago
Fade_Dance – 5 hours ago
This example has two common characteristics of market manipulation - using size to push markets in a direction for personal benefit, and putting the bid in with sole intent to push the market, as in there was never any desire to see the order actually get filled.
If Jane Street was selling options that were only profitable within the context of a strategy that involved pushing massive size into the market near market close and forcing price down, that is likely categorized as manipulation. On the other hand, if they were moving inventory and in the process moved price, and they tweak their trading strategies to further profit from this, that's a more arguable position.
ysofunny – 5 hours ago
directly proportional to the distance from the courts/judges/regulators
markasoftware – 4 hours ago
yunwal – 45 seconds ago
throwaway314155 – 6 hours ago
vaenaes – 4 hours ago
bobvylan – 6 hours ago
fouziat87 – 13 hours ago
bigbacaloa – 6 hours ago