Jane Street hits back at Sebi’s allegations, says ‘regulator changed the goal posts’

What action did SEBI take against Jane Street, and what did Jane Street do in response?

SEBI issued an order requiring Jane Street to deposit money, and Jane Street complied. The firm also stopped its trading activity in the country. The dispute matters because Jane Street’s counsel argued that SEBI acted without first hearing the firm, making the order ex parte and legally significant.

Khambata said the order directed Jane Street to stop trading unless it deposited the money. He argued that the firm had already explained its strategy in a 12-page note submitted on August 30, 2024. Jane Street also held multiple calls with NSE and SEBI officials before surveillance reports were prepared.

The article does not state the deposit amount or describe a final tribunal ruling. Jane Street challenged SEBI’s process, its handling of evidence, and its focus on the scale of trading. It also argued that the regulator changed its position after the fact and should disclose more material relevant to the defence.

What is an ex-parte order, and why did Jane Street describe SEBI's action that way?

An ex-parte order is a decision made in the absence of the party affected by it. In regulatory matters, that can be controversial because the firm may not be able to explain its conduct, correct misunderstandings, or challenge the evidence before restrictions are imposed. The central concern is procedural fairness.

Jane Street’s counsel, Khambata, said the firm deposited the money sought by SEBI even without being given an opportunity to be heard. He also said Jane Street was directed to stop trading unless it made the deposit. Those features led him to describe the action as an ex-parte order with serious consequences.

Khambata argued that Jane Street had already submitted a detailed 12-page note and held multiple calls with SEBI and NSE officials. He said the firm had explained its strategy before surveillance reports were prepared. The article does not state whether a tribunal accepted Jane Street’s characterization.

How large was the deposit order compared with other orders issued by SEBI, and why did Jane Street's counsel call it significant?

The article gives no monetary figure for the deposit, but Khambata said the order was the largest of its kind issued by SEBI. That claim highlights the scale and importance of the regulatory action. A large order can affect a firm’s operations, finances, and ability to continue trading while the dispute is unresolved.

Khambata pointed to the order’s practical effect. Jane Street was directed to stop trading unless it deposited the money sought by SEBI. The firm deposited the money and then stopped trading activity in the country. He argued that this was not a minor procedural step because it placed a major restriction on the firm’s business.

The article also connects the order’s significance to due process. Khambata said any order with civil consequences is adjudication and therefore should involve a fair hearing. The article does not provide the deposit amount, compare it with named earlier orders, or report the tribunal’s final decision.

Why does very large trading activity not, by itself, prove that a trader manipulated the market?

Very large trading activity does not automatically prove market manipulation because volume measures how much is traded, not why or how it is traded. A firm may trade heavily while following a planned strategy, managing risk, or responding to market conditions. Manipulation requires additional evidence that trading was designed to distort prices, create a false appearance, or unfairly affect other participants.

Khambata challenged SEBI’s focus on Jane Street’s trading scale. He asked, “Largeness of trading doesn’t mean manipulation,” and questioned why SEBI was “scared of large trading.” He also said Jane Street had explained its strategy through a detailed note and multiple calls with NSE and SEBI officials.

The article presents this as Jane Street’s defence, not a confirmed finding. It does not describe SEBI’s full evidence or explain the specific conduct alleged to be manipulative. The key issue is whether the regulator can connect the volume to prohibited behaviour, rather than treating size alone as proof.

What is hedging, and how can a trading firm use it to manage the risks created by its positions?

Hedging is a way to manage risk by taking a position that can offset losses from another position. A firm may hold an asset, contract, or exposure that could lose value if prices move in one direction, then use another related trade to reduce that impact. Hedging limits risk, although it can also reduce potential gains and involve costs.

Khambata described Jane Street’s strategy as involving “global practices of hedging.” He said the firm explained its approach in a 12-page note submitted on August 30, 2024, and discussed it in multiple calls with NSE and SEBI officials. These discussions were presented as evidence that the trades had a risk-management purpose.

The article does not provide the precise positions Jane Street took or show how each trade offset another. It also does not establish whether SEBI accepted the explanation. The forward question is whether the regulator views the strategy as legitimate hedging or as conduct that produced an unfair market effect.

What does it mean for a regulatory order to have civil consequences, and why might that create a right to be heard beforehand?

A regulatory order has civil consequences when it materially affects a firm’s money, rights, reputation, or ability to operate, even if it is not a criminal punishment. Such an order can therefore require stronger procedural safeguards. One important safeguard is allowing the affected party to respond before the decision, unless a lawful urgent exception applies.

Khambata said SEBI’s order had significant civil consequences because Jane Street was told to stop trading unless it deposited money. He argued that an order with civil consequences is adjudication. On that basis, he said Jane Street had a constitutional right to a fair hearing before the restriction was imposed.

The article records Jane Street’s argument, not a final legal ruling. It also says the firm had submitted a strategy note and held calls with regulators, but Khambata maintained that this did not replace a proper opportunity to be heard. The dispute therefore concerns both the order’s effect and the timing of the process.

How should a securities regulator balance confidential investigations with a firm's right to see enough evidence to defend itself fairly?

A fair regulatory process must protect confidential information without making the case impossible to answer. A regulator may need to shield complainants, counterparties, or sensitive investigative material. But the firm should still receive enough facts, documents, and reasoning to understand the allegations and challenge them meaningfully. The balance depends on protecting genuine confidentiality while avoiding selective disclosure.

Khambata said SEBI had received 42 complaints but questioned why it refused to disclose the complainants’ identities. He also objected to SEBI masking counterparty details in documents shared with Jane Street. His argument was that the firm was not asking for everything, but needed relevant material for its defence.

The article does not state how SEBI justified the redactions or whether the tribunal ordered further disclosure. It records Khambata’s claim that the regulator could not “cherry pick the document.” The forward implication is that the tribunal may have to weigh investigative confidentiality against Jane Street’s ability to test the evidence fairly.

Key Facts:

📌 - Jane Street deposited the money sought by SEBI.

📌 - Jane Street stopped trading activity in the country.

📌 - Counsel called SEBI’s action an ex-parte order.

📌 - An ex-parte order is made without hearing the affected party first.

📌 - Jane Street said SEBI denied it an opportunity to be heard.

📌 - The firm had submitted a 12-page strategy note.

📌 - Khambata called the deposit order SEBI’s largest of its kind.