New Delhi: The Securities and Exchange Board of India (SEBI) has temporarily barred U.S.-based trading firm Jane Street from participating in Indian securities markets, alleging the company manipulated the Bank Nifty index to create artificial price movements, resulting in widespread losses for retail investors.

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In its interim order, SEBI accused Jane Street of engaging in a deliberate and sophisticated trading strategy involving the accumulation of large volumes of Bank Nifty constituent stocks in the cash and futures markets, which artificially inflated the index's price. At the same time, the firm took positions in derivatives purchasing low-cost put options and selling high-cost call options anticipating a drop in prices.

According to SEBI, in the second half of most trading sessions, Jane Street reversed its initial buying positions by selling the same stocks in both cash and futures markets, triggering a price fall. This decline caused the value of their "put" options to rise while the "call" options lost value, resulting in significant profits for the firm.

SEBI stated that such a trading pattern created a false or misleading appearance of market activity, misleading unsuspecting investors into trading at unnaturally inflated or deflated price levels.

The regulator called the strategy a violation of fair trading norms and highlighted the risk to market integrity posed by such behavior. Jane Street, however, has strongly denied the allegations, calling SEBI's claims "exaggerated" and "inflammatory." The firm has stated that it intends to contest the charges legally and will provide a detailed response before judicial authorities.