A trading boom in complex financial products over the past five years – helped by an influx of millions of new retail investors after the pandemic – has made India a top market for derivatives products.

The surge in trading of Indian index options contracts has seen the world’s most populous country attract interest from global high-speed trading giants, but also resulted in greater regulatory scrutiny.

Yesterday night, the Securities and Exchange Board of India (SEBI) published a 105-page, interim order accusing Jane Street of market manipulation and restrained it from dealing in local securities.

“It has been shown above that at least on 21 days, the JS Group has prima facie engaged in illegal manipulation of the securities that comprise the BANKNIFTY and NIFTY indices, thereby vitiating market fairness and integrity, and illegally benefiting from their trading activities and positions in the index options markets,” SEBI said.

“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 regulator added that it would “impound” ₹48.4 billion (US$567 million) from Jane Street, which it said was the “total amount of unlawful gains” earned due to “alleged violations”.

However, it added that findings were interim in nature, and that if a detailed probe cleared the trading company, the money would be “released for their use” and “they shall be free to continue with their business”.

Jane Street, in an emailed statement, said it “disputes the findings of the SEBI Interim Order and will further engage with the regulator.

Jane Street is committed to operating in compliance with all regulations in the regions we operate around the world”.