Thread by @Starboy2079

Rs 360000000000 Scam (Thread)

How an American firm made Rs 36,000 crore from Indian stock market using deceptive practices

If you've lost money trading Bank Nifty options on expiry days over the past two years, there's a good chance you were a victim of manipulation

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A case in USA opened Pandora Box

In April 2024, A New York based trading firm Jane Street sued Millennium Management (a major hedge fund) and two former employees, Douglas Schadewald and Daniel Spottiswood in U.S. District Court in Manhattan.

Jane Street alleged they stole their "highly valuable, unique, and proprietary" trading strategy centering on India options, which had earned Jane Street about $1 billion in 2023

Court asked them what was that strategy

Jane Street said - Its secret we can tell to any one

This news reached to SEBI

SEBI was surprised what secret strategy Jane Street has developed by which they are making thousands of crore rupees of profit and SEBI started to scrutinize their trade and when SEBI got to know about their secret strategy

SEBI was shocked

How this scam happened
before talking about this, you have to understand some basics of stock market trading

In stock market, you can make money by two ways

Stock trading - by buying and selling individual stocks (Like, Reliance, SBI, HDFC, Adani, Tata motors etc)

Option trading - buying or selling index (like nifty, Bank nifty, Sensex etc)

What is index ?
You must have heard that today Sensex is up or nifty is up or bank nifty is down

Nifty - represents the performance of the top 50 large-cap companies listed on the NSE

Bank nifty - tracks the performance of the top 12 banking stocks listed on the NSE.

Sensex - is index of the top 30 companies listed on the BSE

So whenever price of this stocks go up and down, their respective index go up and down

there is one difference between stock trading

and opting trading

You can buy stock at any time and hold it for indefinite times but options you can not buy for indefinite time

You can buy weekly option or monthly option

Suppose you buy weekly Bank nifty then you have to sell it by coming Wednesday whether you are

in profit or loss

Suppose you bought Bank nifty on Friday or Monday then you have to sell it before 3:15 PM of coming Wednesday

How share market goes up or down?

In share market buying is always equal to selling
But when people buy aggressively then stock prices go up

when people sell aggressively stock prices goes down

And when prices of stocks go up and down then points of their respective index go up and down

Like if price of reliance, ITC, Airtel etc go up then nifty will also go

Now its time to reveal the secret strategy of Jane Street

Jane Street used to aggressively buy banking stocks at Wednesday morning

Suppose at Wednesday morning
Bank Nifty is at 50,000

They buy shares of HDFC bank, SBI, Kotak and Axis
It will generate positive sentiment

and Bank nifty will immediately go from 50,000 to 51,000 or 52,000

Real game happens now
Now same time they secretly sell bank nifty at 52,000 (Call) or they buy Bank Nifty's 50,000 (Put)

Now in the afternoon, they aggressively sell same stock which they bought in morning

due to this Bank Nifty again falls from 52000 to 50000 and they already had sold Bank Nifty at 52,000 in morning, now they buy Bank Nifty again at 50,000 and close their trade and makes huge money in profit

By doing this, In last 2 years they made profit of Rs 36,000 crore

So their secret strategy was fraud

So they used their money power to generate artificial trend in stock market

Small retailers like you and me go by nifty trend so when nifty goes from 50,000 to 51,000 we assume trend is positive and we start buying unaware of the fact

that its an artificial trend, created by a fraud company

Now SEBI has banned them from Indian market and asked them to deposit Rs 4843 crore to Indian banks as fine

This is the biggest action of SEBI so far and we should appreciate SEBI for this proactive investigation

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