Sebi ban on Jane Street! Uday Kotak flags 3 big concerns that plague Indian stock market

Sebi ban on Jane Street: The recent action by the Securities and Exchange Board of India (Sebi), the stock market regulator, against global trading firm Jane Street, has reignited a critical conversation around the Indian stock market's functioning. Billionaire banker and industry veteran, Uday Kotak, weighed in on the development, highlighting three key concerns: the growing influence of money power, the disparity in liquidity between index derivatives and single stocks, and the business models of exchanges and brokers being increasingly volume-driven rather than fundamentally focused.

"Recent stock market actions signify 3 aspects: money power, low liquidity in single stocks vs index derivatives, exchange, broker business models linked to volume, less to fundamentals," Kotak Mahindra Bank's founder said in a post on X on Saturday, July 4.

Jane Street banned in India!

Kotak's comments comment on the back of a Sebi order released in the early hours of Friday, where the market regulator found Jane Street, a US-based trading firm, guilty of manipulating the indices by taking bets in the cash, and, futures and options markets simultaneously for making handsome gains.

Sebi has barred Jane Street from accessing the market and impounded over ₹4,843 crore in gains. The probe has found that Jane Street made a handsome profit of ₹36,671 crore on a net basis during the probe period from January 2023 - May 2025.

India is the world's largest derivatives market, and has seen a huge explosion in volumes over the recent years. As highlighted by Zerodha's Nithin Kamath in a post yesterday, large firms like Jane Street account for nearly 50% of the options trading volumes.

Uday Kotak's comments draw attention to how capital-heavy players with more money can shape the stock market dynamics. Additionally, he said the liquidity in individual stocks remains relatively shallow, making them more susceptible to manipulation and volatility.

Jane Street, however, mainly dabbled in stocks of the Nifty 50 and Bank Nifty indices, which enjoy high trading volumes. This was “unusual” as said by Sebi in its order. "Past instances of securities market violations have mostly involved individual stocks or segments. However, this is an unusual case where, prima facie, multiple liquid stocks with high retail participation have together been manipulated to facilitate the manipulation of the index options market, resulting in massive profits for the manipulators, at the cost of other participants and retail traders," the Sebi order read.

Lastly, Kotak said the Sebi action highlights that exchanges and brokers often tie their revenue models to trading volumes. It creates a scenario where encouraging more trades becomes a priority.

The impact of this was also evident in the response of the capital market stocks on Friday, as Nuvama Wealth, Angel One, Motilal Oswal, CDSL and BSE shares declined up to 11% amid concerns of impact on volumes by Sebi's ban on Jane Street.

Kotak concluded by saying, "The primary role of markets is to facilitate capital formation and enable fair price discovery."

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