More than arb: the short signals behind Jane Street’s India troubles

Prop trader ran parallel strategies, source says. That mix may have given rise to manipulation claims

The Indian equity market began trading on January 17, 2024 with a gaping arbitrage.

The options-implied price of the Nifty Bank Index, which tracks the performance of a dozen of the country’s banks, was more than 500 points – or 110 basis points – higher than the underlying stocks.

Jane Street pounced on the mispricing, selling calls and buying puts on the index to create a short delta position