(Reuters) -New York-based trading firm Jane Street Group is likely to argue that its controversial Indian options trades were a response to outsized demand from retail investors, Bloomberg News reported on Monday, citing people familiar with the matter.
In an interim order on July 3, the Securities and Exchange Board of India barred the company from trading securities in the Indian market, citing that some of its trading strategies were manipulative and led to losses for retail investors.
The Indian market regulator alleged that Jane Street and its related entities manipulated the Bank Nifty index by purchasing large quantities of constituent stocks in the cash and futures markets to artificially support the index in morning trade, while simultaneously building short positions in index options.
However, SEBI lifted the trading restrictions on Jane Street last week after the firm deposited $567 million in escrow. Jane Street said on Monday that it has sought an extension to respond to the interim order.
Jane Street is expected to argue it was eager to facilitate options bets from the country’s retail investors, knowing it would be largely unhedged, Bloomberg News reported.
The firm is likely to argue that it hedged less aggressively in India compared with other markets and deliberately spread its hedging activity over several hours on January 17, 2024 – its most profitable day during the roughly two-year period under regulatory scrutiny – to reduce market impact, the report said.
Reuters could not immediately verify the report, while Jane Street did not immediately respond to Reuters’ request for comment.
(Reporting by Angela Christy in Bengaluru; Editing by Sherry Jacob-Phillips)
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