Retail trading may be impacted if prop giants like Jane Street step back, warns Zerodha CEO
Nithin Kamath warns of a retail trading slump as Sebi bans Jane Street for index manipulation, risking major fallout for markets, brokers.
PTI
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Zerodha founder and CEO Nithin Kamath.(X/@Nithin0dha)
New Delhi, 5 July
Zerodha founder and CEO Nithin Kamath has cautioned that retail trading
activity could be impacted if proprietary trading firms like Jane Street, which
contribute nearly 50 per cent of options trading volumes, scale back their
participation in the market.
This development could have negative implications for both exchanges and
brokers, he added.
"Prop trading firms like Jane Street account for nearly 50 per cent
of options trading volumes. If they pull back – which seems likely – retail
activity (~35 per cent) could take a hit too. So this could be bad news for
both exchanges and brokers," Kamath said on X.
"The next few days will be telling. F&O volumes might reveal
just how reliant we are on these prop giants," he added.
In an order released in the early hours of Friday, the market regulator
found Jane Street (JS), a New York-based hedge fund, guilty of manipulating the
indices by taking bets in the cash, and, futures and options markets
simultaneously for making handsome gains.
It has barred the hedge fund from accessing the market and impounded
over Rs 4,843 crore in gains. The probe has found that JS made a profit of Rs
36,671 crore on a net basis during the probe period from January 2023 - May
2025.
Kamath said that if the allegations against Jane Street are true, it's
"blatant market manipulation" and despite warnings from the exchange,
it continued.
"The shocking part? They kept at it even after receiving warnings
from the exchanges. Maybe this is what happens when you're used to the lenient
U.S. regulatory regime. Think about the structure of U.S. markets: dark pools,
payment for order flow, and other loopholes that allow hedge funds to make
billions off retail investors.
"None of these practices would be allowed in India, thanks to our
regulators, You've got to hand it to Sebi for going after Jane Street," he
added.
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