Jane Street, a US trading firm, filed a lawsuit on Wednesday against India's market regulator, the Securities and Exchange Board of India (Sebi), claiming that it was denied access to critical documents in its defense against allegations of market manipulation.

According to filings, in the case before the Securities Appellate Tribunal (SAT), the firm has asked the tribunal to direct Sebi to share material that the market watchdog believes is critical to rebutting the charges.

Key Highlights

• Jane Street files appeal at India’s SAT, arguing SEBI withheld crucial documents to defend manipulation charges.
• The U.S. trading firm was previously banned for alleged expiry-day index manipulation, accused of reaping from Bank-Nifty volatility.

"These documents are undeniably relevant," Jane Street argued in its appeal.

What exactly are Sebi's allegations against Jane Street?

On July 3, Sebi issued an interim order accusing Jane Street of manipulating the Nifty Bank index and barred it from trading in India.

According to Sebi, the firm followed a two-stage strategy:

• First, buy constituent stocks in both the cash and futures markets to artificially boost the index.
• Then unwinding positions while maintaining large short bets on index options, profiting from the decline.

Jane Street, on the other hand, has denied the allegations, claiming that its actions were standard "index arbitrage". This is a trading strategy that takes advantage of price differences between markets to increase liquidity and efficiency.

Also Read: Jane Street Fulfills SEBI Requirement with Rs 4,843 Cr Escrow Deposit

The firm described Sebi's findings as "fundamentally mistaken" in an internal note to employees days after the order.

The interim ban was lifted on July 18 after Jane Street deposited ₹4,843 crore in an escrow account. The amount Sebi claimed the company earned from the disputed trade. Although the ban was lifted, the firm has yet to resume trading in index options and is still subject to adjudication proceedings that could last six to eight months.

Jane Street had been given 21 days to respond to the order, but she missed the deadline on July 26. Two days later, it asked for an additional six weeks to prepare its defense.