Interesting article, sounds like a…pump and dump without the illegal bit which is boosting a stock’s price by aggressive promotion.
That said, IS it illegal to manipulate the market by being a whale and doing high frequency trading? If an Indian trading firm did this in the S&P500 would they be banned?
Oh wow! Can’t believe this is happening!
Ok, sorry about the sarcasm … is anyone expecting anything else than manipulation when participating in markets?
Sure, when pension funds get screwed over by Enron legislation gets adjusted and when subprime mortgage backed securities suddendly aren’t Triple-A anymore thousands of pages of regulation are written … (and they’ll for a while protect some investors) … but isn’t it an essential part of the market that you can sell anything to the buyer who is willing to pay a price for it?
I know, I know, not part of the security exchange laws and what not, but … just reality?
Not trying to excuse any bad behaviour, just embedding it into the general behavior of human nature. Challenging the premise of the previous poster a bit: doesn’t matter whether the trading firm is large or not, the temptation to make a quick buck is always there, and there are always people willing to take the risk (on either side of the trade).
I think every market have their rules of what is considered manipulation and what’s not. Not sure what is okay in US.
Yes that’s correct. This whole thing started when the law suit happened between Jane Street & Millennium.
It kind of triggered how is it possible that they make such a high profit in Indian markets
I think they are High frequency traders as well.
As far as I know very few companies do HFT and they also have very complicated competitive clauses when they hire people
Hey Goofs my point, and I suspect the regulator’s too, was that I (or any retail sap) can’t do this because we don’t have the size needed to move even a smaller market, which of course…comes back a bit to your point about whether we’d be tempted to do it of we could. Probably yes.
Other than that, I was pointing out what seems to me a bit protectionist by the Indian regulator. As you seem to be hinting to: in a free market trade should be…free.
I am not sure what to think about that. There seem to be derivatives without size limits, why?
Is it really market manipulation or just manipulation of the stupid crowd that sooner or later will lose its money anyhow… 
If you follow you obviously trust the leader. If there are no size limits how can you trust price movements?
Fwiw mature capital markets don’t allow market manipulation (not saying that’s what happened it would be pretty reckless for a company like Jane street)
Exactly.
I don’t know the specifics of what and how constitutes market manipulation.
Regulations are always put in place after the fact due to public outrage, ie after Joe Schmoe FAFOed with things he couldn’t understand and shouldn’t touch. Was 2008 market manipulation? Lloyd Blankfein from Goldman Sachs defended them selling mortgage backed securities because they are market makers, essentially washing his hands by saying “we just gave people what they asked for”.
Market manipulation is not allowed anywhere
What’s called market manipulation might vary by markets.
In the end regulators need to protect retail investors.
Let’s see what finally happens in this case. Jane Street might get away , they might call White House to intervene, or they will get fined.
Do they? Personal responsibility should come to people, eventually.
Think of it like driving a car or riding a motorcycle: it’s legal to do once you have a driving license, and you need to comply with some very basic and broad rules: speed limits, properly functioning brakes/indicators, wear helmet/seat belt, however that doesn’t stop anyone from crashing and dying even while complying with the basic rules if they are incompetent/unlucky. A food retailer is legally required to provide safe food at the time/point of sale, if I leave the chicken on the counter for 3 days and then eat it raw…is it Coop’s fault?
Edit and back on topic: I don’t know what constitutes market manipulation, I guess part of it boils down to having an unfair advantage: by having enough size/weight artificially pumping or dumping the price of a security to benefit from the herd following, then make money on the way up and the way down. Was the GameStop short squeeze from reddit market manipulation?
I think what it means is that they need to make sure the rules aren’t too heavily tilted against small retail investors so that they still have a chance to participate and make a profit, else they won’t participate at all.
Think if retail participants could afford only bicycles, institutional traders were driving monstertrucks and the rules on the roads were “there’s only 1 lane, anybody does whatever they want, if you get hit, you just face the consequences of driving, tough luck!”
I believe yes - regulators need to protect small investors. Specially to create level playing field. This creates trust in markets and helps in long term
However we do need to differentiate between manipulation and exploring marketing inefficiencies. There can be a grey line.
I will follow this case.
Who knows Jane street might end up getting a reward from Govt of India for exposing market vulnerabilities. Or they will be banned for life in India.
By your analogy it really is like that, retail investors have canoes while institutional traders have aircraft carriers.
I don’t have a clear opinion either, Soros explored a market/political inefficiency/discrepancy when he shorted the GBP - I am not a Soros hater, the contrary - in the end he fixed a problem while profiting yet he’s massively hated for it by the right and the left, and conspiracy theorists. Was his massive short selling market manipulation? Probably, I think the key point is whether you and I can do it vs whether only a select few can do it. Ultimately the world is like that, it’s like gravity. In my small binary mind the guardrails need to be specific, and no grey areas: one wants to play? Sure, play, but they need to be aware they’re at a cosmically-sized disadvantage, otherwise accept the fact and just hop on the train. Philosophically, our world - at least the Western world - has set up quite a lot of good guardrails, yet people still manage to crash themselves, it’s inevitable as @cubanpete_the_swiss suggested.
We’re going in circles, sure, fraud should be and is a crime.
But there is an attempt at having a canoe lane where retail investors are somewhat protected from the tremors of the trading of the carriers (there are still rapids and it is still a wild ride, it’s just harder for a carrier to pump and dump you out of your money or promise a trip to Venice and send you to Guantanamo). In the US, they’ve gone as far as to provide insurance against fraud up to 500k…
Wasn’t it more like winning a bet? Nobody forced the BoE to buy the pounds…
IMO market manipulation are things like pump and dump, tape painting, unfunded rumors propagation, etc.
Don’t think market manipulation is specially for retail protection. In general one benefit of public markets is that they’re regulated, companies are audited, have to disclose meaningful events fairly, players (traders, stock exchanges, etc.) have to follow the same rules (which is a big difference with private markets).
Actually the ERM regulations meant they were essentially forced to, and politically had to.
The interesting thing is that Soros acted as a doctor prescribing a painful treatment which then, a few years later, massively benefited the UK and lead to Blair’s ear of prosperity.
This is not about Bitcoin but the rise of companies like MSTR whose core business model is becoming to buy Bitcoin. Rather than doing their normal business, these firms are trying to attract investors by positioning themselves as BTC holding companies.
Of course whoever needs to buy BTC can just buy it directly or via ETF.
This recent video from Boyle throws light on how ludicrous this is becoming.
Unfortunately for world ETF investors our money will eventually go into these companies via index funds.
Read a bit more about it and the problem with India is most likely the stock market gambling. Apparently the majority of option trading is done by retail and they’re held for like 30min.
The fact that market makers are able to fleece those gamblers (who have no idea how options work, how to hedge, etc) isn’t surprising.
While these actions were not a breach of any regulation, SEBI said that the “intensity and sheer scale” of their intervention, and the rapid reversal of their trades “without any plausible economic rationale, other than the concurrent activity in and impact on their positions in the BANKNIFTY index options markets,” was manipulative
I wonder if it was in Indian firm making money, if the reaction would be similar. Personally I’d be surprised if JS didn’t have an economic rationale (hedging their market making options positions).
And if you want to protect retail investors, make gambling legal (easier to tax and everyone knows the house profits) and teach retail about long term investing.