'The investigation is at a very critical stage. We are not going to give every single document.'
The Securities and Exchange Board of India on September 9 told the Securities Appellate Tribunal (SAT) that no further data would be shared with Jane Street, citing the ongoing and expanding scope of its investigation against the US-based trading firm.
A three-member SAT Bench, led by Justice P S Dinesh Kumar, admitted appeals filed by Jane Street and its group entities.
It directed Sebi to explain within three weeks why documents sought by the firm cannot be disclosed.
Jane Street may file its rejoinder in the following three weeks. The matter will be heard again on November 18.
The case is being closely tracked for its potential implications on India's derivatives market.
Meanwhile, Jane Street's personal hearing in relation to Sebi's July 3 ex-parte interim order, earlier set for September 15, has been adjourned.
In that order, Sebi had alleged market manipulation by Jane Street.
According to the regulator, the firm used a two-legged strategy -- first building long positions in Nifty Bank constituents in both cash and futures to inflate the index, then unwinding while maintaining short positions in index options.
Sebi lifted Jane Street's temporary trading ban after it deposited Rs 4,844 crore, which the regulator categorised as gains from 'manipulative practices'.
Appearing for Sebi, Senior Counsel Gaurav Joshi said the firm has already been provided with over 10 gigabytes of data and no additional information will be shared.
Jane Street, however, has demanded prior surveillance and investigation reports, including one by Sebi's Integrated Surveillance Department and correspondence with the National Stock Exchange.
The firm claims these documents cleared it of wrongdoing and are vital to its defence.
Sebi countered that the requested material was not relied upon in the July 3 order and contains confidential or irrelevant details.
"The investigation is at a very critical stage. We are not going to give every single document. Most of the material (sought) is irrelevant, or confidential and not required to be given at this stage," argued Joshi.
'No show cause has been issued because we are still investigating the matter. The period may be significantly larger.
"The scope of the show cause may enlarge significantly more than what is pointed out in the interim order," Joshi added.
Jane Street, he further said, is required to explain its trading strategies to Sebi.
And the regulator cannot share all the documents sought, such as draft reports, minutes of the meeting, and analysis of Sebi circulars.
Representing Jane Street, Senior Counsel Darius Khambata pressed for disclosure of the correspondence with NSE.
"Why should Sebi be concerned about producing it? Is it because the report exonerates us? If it is material, it must be disclosed," he said.
The trading firm has also sought disclosure of the complaint made by a UAE-based hedge fund manager, which Jane Street claims to have led to a 'flipping' of the case in just 20 days of the prior reports.
Jane Street also sought complete trade logs with counterparty details, some of which Sebi had masked. The regulator clarified that only unrelated third-party names were withheld.
Jane Street maintains that the NSE's analysis, covering nearly 16 of the 25 months cited by Sebi, found no evidence that its trades distorted prices to benefit its derivatives positions.
Feature Presentation: Aslam Hunani/Rediff
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