From Manipulation to Regulation: Algorithmic Trading, the Jane Street Order and Sebi’s Evolving Governance Framework for India’s Derivatives Market

India’s equity derivatives market is the largest in the world by contract volume, yet its structural architecture has rendered it acutely vulnerable to algorithmic manipulation. On 3rd July 2025, the Securities and Exchange Board of India (SEBI) issued a 105-page ex-parte interim order against the Jane Street Group, alleging that the firm had systematically manipulated the Bank Nifty and Nifty 50 indices across 18 expiry days between January 2023 and March 2025, generating alleged unlawful gains of INR 4,843.57 crore. The enforcement action preceded, by mere months, the full operationalisation of SEBI’s February 2025 circular on the safer participation of retail investors in algorithmic trading, which took binding effect from April 1, 2026. This article examines the legal foundations of the Jane Street order under the SEBI Act, 1992 and the Prohibition of Fraudulent and Unfair Trade Practices Regulations, 2003, analyses the structural mechanisms of the alleged manipulation and critically evaluates whether SEBI’s 2026 algorithmic trading framework addresses the institutional governance deficits that the case exposed. The article finds that while the framework represents a meaningful advance in retail investor protection, it leaves critical gaps in the regulation of institutional and cross-segment algorithmic conduct, and argues for a statutory definition of algorithmic market manipulation alongside direct registration obligations for Foreign Portfolio Investors deploying high-frequency strategies on Indian exchanges.