NSE provided core data and analysis in SEBI’s probe into JS Group’s alleged market misconduct

The National Stock Exchange of India (NSE) has been identified as the primary exchange playing a crucial regulatory and investigative role in the matter concerning alleged manipulative trading activities by the Jane Street Group, as documented in the regulatory order, said sources.

Proactive Identification and Early Warnings

NSE’s surveillance systems detected suspicious trading patterns linked to the JS Group as early as February 2025. The order records that “suspicions around the prima facie manipulative trading patterns of JS Group arose in early 2025, on SEBI’s instructions, NSE as a first line regulator clearly and explicitly cautioned the JS Group to desist from taking on large risks”, sources said. No comparable proactive measures are documented as having been undertaken by other exchanges, including the Bombay Stock Exchange (BSE), thereby underscoring NSE’s leadership in timely regulatory intervention.

Regulatory Action and Explicit Caution

Following SEBI’s instructions, NSE issued a direct caution to the JS Group in February 2025, instructing it to refrain from engaging in high-risk trading practices that could disrupt market stability. The document does not record any similar warnings or regulatory actions from other exchanges, suggesting NSE’s unique vigilance in this context.

Robust Surveillance Systems

The order attributes the detection of complex manipulative strategies, such as “Intra-day Index Manipulation,” to NSE’s advanced surveillance infrastructure. NSE’s systems were operational throughout the examination period from January 1, 2023, to March 31, 2025, identifying suspicious trading on several specific dates, including January 17, 2024, and July 10, 2024, particularly in BANKNIFTY constituent stocks and futures. The document makes no mention of similar surveillance activities by other exchanges.

Extensive Data Analysis and Evidence

The investigation relied extensively on data and analytical inputs provided by NSE. This included detailed analyses of traded turnover, order-level Last Traded Price (LTP), and delta build-up patterns across cash, futures, and options segments. No comparable contributions from other exchanges are referenced, indicating NSE’s central role as the primary source of actionable intelligence.

Collaboration with SEBI

NSE maintained close coordination with SEBI during the investigation, supplying critical data and insights essential to the preparation of the interim order. While suspicions initially arose “on SEBI’s instructions” (Page 100), NSE’s role in executing these directives through surveillance and reporting was pivotal. The document contains no indication of collaborative efforts from other exchanges in this matter.

Monitoring of Expiry-Day Activities

NSE’s surveillance systems were notably effective in monitoring trading on expiry days, which are particularly sensitive periods susceptible to manipulative practices. The order specifies that NSE identified manipulative trading on multiple expiry dates, including January 17, 2024, July 10, 2024, and May 15, 2025, through real-time observation of trading volumes and price movements. No evidence of similar monitoring by other exchanges is provided in the document.

High-Frequency Trading (HFT) Surveillance

The JS Group’s manipulative strategies included high-frequency trading (HFT), detection of which demands advanced technological capabilities. The order notes that “the JS Group’s business model relied on significant short-term High Frequency Trading (HFT) in the securities market” (Page 99), and credits NSE with having the infrastructure required to identify and analyze such complex activities. Other exchanges are not mentioned in this regard, highlighting NSE’s technological advantage.

Ongoing Monitoring Responsibilities

SEBI’s interim order directs stock exchanges, specifically highlighting NSE, to “closely monitor any future dealings and positions of JS Group on an ongoing basis, to ensure that Entities do not either directly or indirectly indulge in any kind of manipulative activity”. Although this directive applies to all exchanges, the document’s emphasis on NSE’s past actions suggests that it is the principal entity expected to undertake this responsibility effectively.

Technological and Analytical Capabilities

According to sources, NSE’s technological infrastructure allowed for the real-time monitoring and detection of intra-day manipulations, including the identification of aggressive trading patches such as those observed on January 17, 2024. The exchange’s systems facilitated detailed LTP-based analysis at both the order and trade levels, enabling precise attribution of market movements to the JS Group’s trading activities. NSE’s surveillance capacity also extended to handling the complexities of HFT, and its systems remained consistently reliable and scalable over the two-year investigation period.

In conclusion, the order consistently portrays NSE as the primary exchange responsible for identifying, analyzing, and reporting manipulative trading practices by the JS Group, demonstrating significant technological sophistication and proactive regulatory engagement unmatched by other exchanges mentioned in the document.