US-based trading firm Jane Street has criticised the Securities and Exchange Board of India, describing its recent order alleging market manipulation as 'fundamentally mistaken' in an internal letter to employees.
The firm defended its trading activity as 'basic index arbitrage', rejecting Sebi's characterisation of its strategy as manipulative.
Jane Street said it is preparing a formal response and is exploring legal options. It also claimed that repeated attempts to engage with the markets regulator since February had been 'consistently rebuffed'.
In a letter sent to staff over the weekend, Jane Street accused Sebi of using 'inflammatory language' and displaying a 'misunderstanding of standard hedging practices and the interrelationships between derivative and underlying markets', in its July 3 order.
'It's deeply upsetting to see the firm mischaracterised this way,' the letter said. 'We take pride in the role we serve in markets around the world, and it's painful to have our reputation tarnished by a report based on so many erroneous or unsupported assertions.'
Sebi's order barred Jane Street and its group entities from participating in the Indian market, and directed the disgorgement of alleged "unlawful gains" amounting to 4,834 crore. The regulator also indicated that its investigation into the group's other trading strategies was ongoing.
Responding to Jane Street's claims, the markets regulator said: 'As with all Sebi orders, the July 3 order is a speaking order that lays out Sebi's prima facie case and addresses all relevant areas and questions.''At this stage, we have nothing to add to what is already contained, explained and reasoned in that order,' Sebi said.
- Khushboo Tiwari, Samie Modak, Business Standard