Author: Sandra (Yijia) Cai
Published: July 26, 2025
Status: Open Source, contributions welcome
In July 2025, Indian regulators issued a sweeping ban on Jane Street Group from participating in its securities markets. This paper offers a forensic, quantitative breakdown of the two-legged trading strategy that attracted SEBI's scrutiny, one of the most significant enforcement actions in modern derivatives trading.
The paper covers:
- The mathematical model behind the index-lifting and gamma harvesting strategy
- A step-by-step execution timeline: from delta positioning to profit realization
- Quantitative P&L simulations across varying index moves
- How SEBI's advanced surveillance infrastructure uncovered the manipulation
- The legal framework and penalties invoked
- Context
- Strategy Overview
- Mathematical Model
- Execution Illustration
- Market Reaction & Sentiment
- Gamma Convexity P&L Simulation
- Legal Framework
- How SEBI Uncovered the Manipulation
- Jane Street used a two-legged strategy: aggressively purchasing illiquid NIFTY index constituents (Leg 1) to mechanically lift the index, while holding pre-positioned delta exposure in NIFTY options (Leg 2) that repriced due to the artificial index shift.
- The strategy exploited gamma convexity, near-expiry ATM options are highly sensitive to small index moves, generating outsized P&L relative to the manipulation cost.
- SEBI detected the scheme through cross-market orderbook correlation, Granger-causality analysis, and recurring "strategy fingerprints" in high-frequency trade data.
- Penalties included an asset freeze of 48.4 billion rupees (~$570M), bank account locks, and full market access prohibition.
The full paper is available as a PDF in this repository.
To cite this work:
Cai, Sandra (Yijia). "Inside the Ban: A Quantitative Autopsy of Jane Street's Trading
Tactics in India." July 26, 2025.
Pull requests are warmly welcome! See CONTRIBUTING.md for full guidelines.
This work is licensed under Creative Commons Attribution 4.0 International (CC BY 4.0).
Sandra (Yijia) Cai
Founder @ Plurall AI | Neo Scholar Finalist
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