Here's why Nithin Kamath says ban on Jane Street 'could be bad news for both exchanges and brokers'

The Securities and Exchange Board of India (SEBI) initiated a significant regulatory move on July 4 by cracking down on Jane Street, a prominent global proprietary trading firm. This decision has sent shockwaves through India's derivative market, raising concerns among industry stakeholders. Nithin Kamath, founder of Zerodha, has expressed apprehension that the ban might have unintended consequences for both exchanges and brokers operating within the country. Kamath believes that the restriction on Jane Street could lead to reduced liquidity in the derivatives segment, which is crucial for efficient market functioning. Brokers and exchanges rely on firms like Jane Street to provide the necessary liquidity that facilitates smoother trading operations. Without the participation of such key players, the market may experience increased volatility and wider bid-ask spreads, potentially impacting the cost of trading for retail investors. Furthermore, Kamath suggests that the ban could deter foreign investment in India's financial markets. Global trading firms play a vital role in attracting international capital, and their absence might signal a less favorable environment for foreign participants. This development could potentially slow down the growth and competitiveness of India's exchanges, affecting the overall market ecosystem. As the situation unfolds, stakeholders are closely monitoring the impact of SEBI's decision on the market dynamics.

— Authored by Next24 Live