Jane Street: Gaming an Outdated System Is Not Necessarily Illegal

The case is a reminder to reform India's market regulation and surveillance with clear red lines set for what violates the rules

- PRABAL BASU ROY

Major regulatory intervention by the Securities and Exchange Board of India (Sebi) in the case of Jane Street has prompted us to examine the worst-kept secret in our financial markets—namely, manipulation of indices to move the stock market in a certain direction for profits to be made through synthetic derivatives. While the Sebi move aims to protect market fairness and retail investors, its regulatory action seems delayed. This is not only in the current case of Jane Street, but, more worryingly, in addressing systemic flaws in our otherwise well-regulated trading markets and the inadequacy of tech-based safeguards to check potential market abuse by algorithmic trading firms.

Internationally, New York-based Jane Street is seen as a leader in this narrow specialty of algo trading, ahead of the likes of Goldman Sachs, Citadel, Virtu, SIG, etc. Classmates and market experts confirm that Jane Street's interview process for recruitment is truly grueling. It involves a series of games (primarily card games) played by interviewees against each other that call for the use of probability theory. It is rumored that the now-disgraced and convicted (but brilliant) Sam Bankman-Fried of FTX had beaten everyone else for a coveted spot in Jane Street's trading internship program.