One of the fastest-growing derivatives markets in the world is receiving more attention than ever thanks to the legal drama surrounding an Indian options strategy that purportedly made $1 billion for Jane Street Group.
The trading firm’s lawsuit against two former employees and Millennium Management has captured the attention of Wall Street, as Jane Street had earlier this month claimed that they had stolen a trade method that was both private and “immensely valuable.” The strategy’s emphasis on Indian options only became evident after Millennium’s attorneys unintentionally mentioned the nation at a Friday session.
“Options market-making is a ‘winner takes all game’,” stated Anant Jatia, Mumbai-based founder and chief investment officer at Greenland Investment Management. “Market making in India has become very competitive where the fight is not even over microseconds, it’s nanoseconds.”
About 35% of option trades in India are made by retail investors, and 90% of active retail traders are thought to lose money on derivatives, according to the market regulator.
During Friday’s hearing, the judge heard Jane Street’s claim that it made approximately $1 billion from the tactic the previous year. According to a January Bloomberg story, the business generated net trading revenue of almost $10 billion last year.
“As retail participation in derivatives has gained traction in the post-Covid world, these players could be misled by complex market-maker positioning,” said Tejas Shah, head of derivatives trading at Equirus Securities Pvt.
“The driving force is the liquidity that is now available in India,” stated Vaibhav Sanghavi, hedge fund manager at ASK Investment Managers, Mumbai. “It has become one of the only markets besides the US that can offer the kind of opportunity.”
