Jefferies weighs impact of Jane Street order on stock market, BSE, and Nuvama

Foreign brokerage Jefferies said its interactions with market participants suggest the impact of Jane Street’s exit from Indian markets may be manageable. It noted that the fall in turnover could be offset by proprietary and high-frequency traders, especially as manipulative elements potentially decline. Earnings hit for BSE may be low as foreign portfolio investors (FPIs) form 3-4 per cent of turnover, but higher for Nuvama, it said.

Jefferies added that there is unlikely to be any counterparty risk related to Jane Street’s contracts, as trades are guaranteed by clearing corporations and the firm has three months to unwind open positions.

“Hedge funds typically hold larger positions in Single Stock Futures (SSFs), with relatively limited activity in options,” Jefferies noted.

The brokerage highlighted that Jane Street operated in both cash and derivatives markets as a Foreign Portfolio Investor (FPI) and as a trading member, meaning its volumes were reflected in both FPI and proprietary categories.

“Since the regulatory inquiry was already in progress, its trading activity had already declined over the past few months. According to exchange data, FPIs account for 3–8 per cent of equity derivatives turnover, while proprietary traders contribute 60–65 per cent; the remainder comes from individuals and others,” it said.

Jefferies said the major uncertainty is whether this episode could have a broader impact on trading volumes. “The next week’s trend in derivatives volumes will be important to watch, particularly around index derivatives expiries on Tuesday and Thursday. Interestingly, index options premium turnover was slightly higher week-on-week on both exchanges this Friday, though marginally below the two-month average,” it added.

For BSE, derivatives drive 58 per cent of FY26 revenues. In this segment, FPIs drive 3-4 per cent of turnover, and Jefferies estimates that contribution from Jane Street would be a smaller subset of that ( 1 per cent).

“Hence, we see a limited impact of JS on BSE’s earnings. A 100 basis points impact on our FY26 premium ests would impact EPS by 60-70 basis points,” it said.

For Nuvama, asset services are projected to contribute 26 per cent and investment banking (IB) & institutional equities (IE) about 20 per cent to FY26E revenues. These segments contribute more significantly to profits due to lower cost-to-income (C/I) ratios, it said.

Jefferies noted that Jane Street could be a key client for Nuvama. Assuming 15–20 per cent of asset services and IE revenues were linked to Jane Street, the brokerage estimates a potential 5–6 per cent hit to overall revenues and a 7–8 per cent impact on earnings.