Jane Street Wins Delay as SAT Asks Sebi for Formal Reply

In a significant development for India’s financial markets, the Securities Appellate Tribunal (SAT) has directed the Securities and Exchange Board of India (Sebi) to file a formal response to an appeal lodged by U.S.-based high-frequency trading firm Jane Street. This move effectively halts further personal hearings in the case, delaying a potential final order from the market regulator until the matter is heard again.

Background of the Dispute

The dispute began with a July 3, 2025 interim order by Sebi that accused Jane Street of market manipulation in the Bank Nifty index. The regulator alleged that the firm engaged in a two-part strategy: accumulating large quantities of Bank Nifty constituent stocks to artificially inflate the index while simultaneously holding short positions in index options. Sebi claimed this allowed the firm to profit from the index’s subsequent price movements, amounting to what it called “unlawful gains” of over ₹4,843 crore. Sebi’s order had temporarily barred Jane Street from trading, but the ban was lifted after the firm deposited the full amount in an escrow account, as directed.

Jane Street, however, has consistently denied the allegations, maintaining that its trades were legitimate index arbitrage strategies aimed at improving market efficiency.

The Heart of the Matter: The Document Dispute

The core of Jane Street’s appeal to SAT is a plea for transparency and due process. The firm has accused Sebi of withholding critical documents that it believes are essential to its defense. These documents reportedly include:

• Internal Sebi reports and correspondence with the National Stock Exchange (NSE) that allegedly cleared Jane Street of any wrongdoing in earlier probes.
• The original complaint from a hedge fund that is believed to have triggered Sebi’s re-examination of the case.
• Complete trade logs and detailed data that the firm claims were selectively redacted or withheld by the regulator.

Jane Street argues that Sebi’s refusal to provide these documents violates the principles of natural justice, citing a Supreme Court judgment that mandates quasi-judicial authorities to provide all relevant material to an accused party, not just the documents explicitly relied upon in an order.

SAT’s Direction and What it Means

In its ruling, the SAT has given Sebi three weeks to submit its reply, detailing why it has not disclosed the requested documents. The tribunal also ordered a temporary stay on any personal hearings between Sebi and Jane Street until the next hearing on November 18.

This decision is a procedural victory for Jane Street, as it delays the issuance of a confirmatory order from Sebi and forces the regulator to formally justify its stance on document disclosure. The outcome of this legal battle is being watched closely by the entire financial community, particularly by other foreign institutional investors and high-frequency trading firms, as it could set a precedent for regulatory transparency and disclosure norms in India’s booming derivatives market. The case represents a significant test of Sebi’s authority versus the right of a market participant to a fair defense.