India is ramping up scrutiny of Wall Street traders with the nation’s securities regulator turning more aggressive in targeting even prominent foreign players like JPMorgan Chase & Co. in its $5 trillion stock market.
That push has been on display in recent days as the Securities and Exchange Board of India accused a Mauritius-based JPMorgan unit of executing manipulative stock trades. Last year, in one of its most dramatic actions on a foreign firm, SEBI accused Jane Street of market manipulation, an allegation that the US financial giant has denied.
SEBI has signaled internally that it is getting more proactive in examining transactions by domestic and international traders as part of an effort to protect retail investors, according to people familiar with the matter, who asked not to be identified discussing a private matter.
Other global heavyweights including Bank of America Corp. and investment giant Capital Group have already found themselves in regulatory cross-hairs in India this year. It’s a sharp contrast with earlier decades when foreign securities firms were rarely penalized in the South Asian country. Now, Indian regulators are demanding a level of accountability more commonly associated with counterparts in the US and Europe.
The newer strictness comes at a time when global banks and traders have been chasing profits in what is one of the world’s fastest growing economies. Regulators are particularly focused on India’s options market, the world’s largest by contracts traded, where financial firms have been piling in to capitalize on lucrative arbitrage and market-making opportunities.
Firms like JPMorgan have increasingly made bets around the Indian market, but that calculus has the potential to change as tighter rules curb volumes and regulatory scrutiny intensifies. Many firms are now scrambling to upgrade their local compliance levels in India, lawyers said.
“SEBI’s message is unambiguous: scale, reputation and global standing offer no shelter from India’s market-conduct rules,” said Pradyun Chakravarty, a partner at New Delhi law firm King Stubb & Kasiva.
JPMorgan declined to comment. The SEBI order names a Mauritius unit that is separate from J.P. Morgan India Pvt., its local subsidiary. The order against the offshore entity, therefore, does not directly impact JPMorgan’s activities in India which are mostly conducted through its local unit.
Jane Street declined to comment. It has deposited more than $500 million in an escrow account to comply with an order from India’s securities regulator, and is pursuing an appeal in an Indian court seeking access to additional documents.
Tuhin Kanta Pandey, who took over as SEBI’s chair last year, has put greater emphasis on using technology. As a result the regulatory body has begun to more closely track trades when there are sharp or unexplained swings in the market, the people familiar with the matter said, asking not to be named discussing information that isn’t public.
The Indian regulator hasn’t singled out foreign firms. Domestic players have also been scrutinized with a local brokerage, Mansi Share and Stock Broking, being investigated alongside the JPMorgan unit. Still, international financial giants appeared to enjoy more leeway in the past.
SEBI is attempting to signal that it welcomes global players to India, but no one will be exempt from punishment if they are seen as breaching rules, the people familiar with the matter said. SEBI didn’t respond to an email seeking comment.
This January, SEBI sent Bank of America a show cause notice alleging employees shared non-public information about a 2024 block trade, Bloomberg News reported earlier this year, citing people familiar with the matter. The regulator alleged bank employees were sharing information between workers who were not directly involved in the deal. In May, the bank agreed to pay about $61,691 to settle the claims without denying or admitting to alleged violations.
India’s market regulator has also sought information from Capital Group about trades by its entities in the local stock market that were flagged in a front-running case in early 2025, Bloomberg News has reported. SEBI is yet to pass an order in the matter. Capital Group didn’t respond to a request for comment.
In late August, regulators alleged that the JPMorgan unit, called Copthall Mauritius Investment Ltd., and the domestic firm Mansi Share placed outsized orders in Sensex stocks during the closing auction, accounting for more than 90% of orders in some of the securities it identified. They later cancelled large portions of those orders, influencing indicative closing prices without fully executing the trades, the regulator said.
Copthall is likely to contend that the issue was technical in nature rather than manipulative, Bloomberg News has reported. SEBI said a trading ban on Copthall and Mansi Share would be lifted once the entities paid back nearly 37 million rupees ($390,000) in combined unlawful gains to the regulator.
At the same time, SEBI has itself faced scepticism in recent years, fueled by questions over the speed and consistency of its enforcement, as well as concerns about potential conflicts of interest. Its handling of the Adani-Hindenburg controversy has also been in the spotlight. SEBI has addressed such criticism by putting in place new regulations including those related to conflicts of interest among its top officials.
It’s also grappled with other problems. Some high-frequency firms and market makers have been shying away from the new closing-auction system — India’s latest way of setting official closing prices for stocks — partly due to fears they may have to prove to SEBI they aren’t involved in any manipulative activities, according to people familiar with the matter. This has reduced liquidity during the auction window, resulting in greater volatility leading to sudden drops in the benchmark index.
The regulator has agreed to tweaks to the closing system to address early concerns.
Part of its regulatory push is intended to protect retail investors from losses as they operate on the other side of the trades being conducted by sophisticated global entities. Indian retail traders lost about $9.6 billion trading equity futures and options in the year ended March. “Losses by such investors, by any yardstick, are huge,” said Ashwani Bhatia, a former SEBI official. “Some action is urgently needed.”
Still, analysts say the regulatory pressures are unlikely to keep global investors away in the long term.
“We are not seeing a structural decline in global sentiment towards India because of stronger regulation,” said Niren Patel, a Mumbai-based partner at Khaitan & Co. “Rather, global banks and investors increasingly view higher compliance standards as part of India’s market maturation.”