Risk if proprietary giants like Jane St exit Retail trading : Nithin Kamath Zerodha

Zerodha co-founder and CEO Nithin Kamath has expressed serious concerns about the potential fallout from the recent regulatory action against U.S.-based hedge fund Jane Street. Kamath warned that retail trading activity in India could see a significant dip if proprietary trading firms—like Jane Street, which account for a major chunk of options volume—scale back their presence in the market.

In a post on X (formerly Twitter), Kamath highlighted that proprietary trading firms are responsible for nearly 50% of options trading volumes on Indian exchanges. “If they pull back, which seems likely, retail activity (which is around 35%) could take a hit too,” he said. “This could spell trouble for both exchanges and brokers.”

The market was jolted early Friday when the Securities and Exchange Board of India (SEBI) issued an order barring Jane Street from accessing Indian markets. The hedge fund was found guilty of manipulating indices by placing simultaneous bets across cash, futures, and options segments, leading to substantial gains.

According to the SEBI order, Jane Street earned a net profit of ₹36,671 crore between January 2023 and May 2025 through these strategies. SEBI has impounded over ₹4,843 crore and prohibited the firm from market participation.

Kamath didn’t mince words about the severity of the alleged misconduct. “If these allegations are true, it’s blatant market manipulation,” he said. “The shocking part? They kept at it even after receiving warnings from the exchanges.”

He also contrasted regulatory regimes, pointing to practices prevalent in the U.S. financial system such as dark pools and payment for order flow, which he claims enable hedge funds to profit at the expense of retail investors. “None of these practices would be allowed in India, thanks to our regulators,” Kamath noted. “You’ve got to hand it to SEBI for going after Jane Street.”

Kamath concluded by saying that the next few days will be crucial, as F&O volumes will reveal just how dependent the Indian market has become on large proprietary trading firms.