Jane Street to challenge India ban, says it engaged in basic arbitrage

Jane Street has told unit it volition contention a ban by India's fiscal regulator which has accused the U.S. high-frequency trading elephantine of marketplace manipulation, adding that its practices successful question were "basic index arbitrage trading".

Jane Street said it was "beyond disappointed" by what it called "extremely inflammatory" accusations from the Securities and Exchange Board of India (SEBI) and is moving connected a ceremonial response, according to an interior email sent to employees implicit the play that was seen by Reuters.

The email did not elaborate connected the imaginable enactment that Jane Street might take.

SEBI connected Friday barred the steadfast from buying and selling securities successful the Indian marketplace and seized $567 cardinal of its funds.

It alleged that Jane Street bought ample quantities of constituents in India's Bank Nifty scale successful the currency and futures markets to artificially enactment the scale successful greeting trade, portion simultaneously gathering ample abbreviated positions successful scale options which were exercised oregon allowed to expire aboriginal successful the day.

The regulator, which tracked Jane Street's trading patterns for much than 2 years, has besides widened its probe to see different indexes and exchanges, a root has said.

Over the past 3 years, India's derivatives marketplace has had explosive maturation arsenic retail investors swarmed successful and is present the world's largest. But that has besides led to losses for galore mean investors, which has go a interest for regulators.

Jane Street has been sounding out Indian instrumentality firms for its upcoming conflict with SEBI but has yet to prosecute one, said 4 sources with cognition of the matter. They were not authorised to remark connected the substance and declined to beryllium identified.

The adjacent measurement by Jane Street would apt beryllium to lodge an entreaty with the Securities Appellate Tribunal, the sources added.

Jane Street did not instantly reply to a petition for remark connected Monday.

In its email to staff, Jane Street said arbitrage trades were "a halfway and commonplace mechanics of fiscal markets that keeps the prices of related instruments successful line."

SEBI's bid that this enactment is "prima facie manipulative" disregards the relation of liquidity providers and arbitrageurs successful markets, Jane Street added.

The proprietary trading steadfast besides took contented with SEBI's claims that it had failed to respond adequately to the regulator's concerns, saying the firm's executives had met with regulators and speech officials aggregate times.

"Once again, we near this process feeling that we had reached an knowing of the concerns and reflected them successful modifications to our trading behaviour."

"Since February, we person made ongoing efforts to pass with SEBI and person been consistently rebuffed," the email said.

SEBI said it had nary remark beyond Friday's order.

India accounted for astir 60% of planetary equity derivative trading measurement successful May, according to the Futures Industry Association.

Data retired connected Monday showed that equity derivative losses for India's retail traders widened by 41% to 1.06 trillion Indian rupees ($12.4 billion) successful the fiscal twelvemonth that ended successful March.

SEBI Chairman Tuhin Kanta Pandey besides said connected Monday that the regulator was enhancing its surveillance to scrutinize manipulation successful derivatives trading, but added that determination whitethorn not beryllium galore much cases like Jane Street.

Other overseas proprietary trading firms that are progressive in India include Citadel Securities, IMC Trading, Millennium and Optiver.