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Shares of brokerage firms and market infrastructure institutions (MIIs) traded on a mixed note on Monday after a sharp sell-off last week following the Securities and Exchange Board of India (Sebi) crackdown on Jane Street. The US proprietary trading firm Jane Street was barred from Indian stock markets, triggering concerns over a potential decline in futures and options (F&O) trading volumes.
In early trade, Nuvama Wealth, Jane Street’s domestic trading partner, gained 2 per cent, while 5Paisa Capital also rose by 2 per cent. However, other brokerages including Motilal Oswal Financial Services, Angel One, and IIFL Capital saw marginal losses amid continued investor caution.
Last Friday, shares of these brokerage firms plunged by up to 11 per cent after Sebi debarred Jane Street and ordered the impounding of alleged illegal gains amounting to Rs 4,843.5 crore. Jane Street was a significant player in the Indian equity derivatives market, particularly in the options segment.
Impact on F&O Volumes and Brokerages
Analysts warn that Sebi’s ban on Jane Street, which accounted for nearly 50 per cent of options trading volumes, may lead to a substantial drop in F&O trading activity. With proprietary trading firms dominating the derivatives space, a reduction in their participation could also affect retail investor volumes, which currently constitute around 35 per cent of the market.
According to Zerodha founder Nithin Kamath, the coming days will be critical in assessing how much Indian derivatives markets rely on large proprietary trading firms like Jane Street. He noted that the equity derivatives segment has already seen a 35 per cent decline in average daily turnover, falling from a peak of Rs 537 trillion in September to Rs 346 trillion as regulatory tightening continues.
Nuvama Expected to Bear the Brunt
Nuvama Wealth is expected to face a significant impact due to its close association with Jane Street. Analysts estimate that 15–20 per cent of Nuvama’s revenues from asset services and institutional equities could be affected, potentially leading to a 5–6 per cent decline in overall revenue and a 7–8 per cent drop in earnings for FY26.
Market Infrastructure Institutions See Pressure
Among MIIs, the BSE stock price dropped by 6.5 per cent, closing at Rs 2,639, while Central Depository Services Limited (CDSL) fell nearly 2.5 per cent to Rs 1,763. Although foreign portfolio investors (FPIs) contribute only 3–4 per cent to BSE’s turnover, the market remains cautious given the importance of proprietary trading to overall volumes.
Exchange data highlights that proprietary trading firms account for 60–65 per cent of equity derivatives turnover, with FPIs contributing between 3–8 per cent, and the remainder coming from individual investors and others.
Growing Role of Algorithmic Trading
Data from NSE Market Pulse reveals that algorithmic trading accounts for over 69 per cent of volumes in the derivatives market, compared to 55 per cent in the cash market. Sebi’s FY24 data indicates that only 2.5 per cent of FPIs are involved in algo trading, a select group that includes Jane Street.
With key index derivatives contracts expiring this week, the market will closely watch trading volumes and volatility to gauge the longer-term impact of Sebi’s regulatory move on India’s derivatives ecosystem.
English (US) ·