Yes, markets get gamed—but you don’t have to lose

That frustration is understandable. After all, when 91% of retail derivatives traders lose money, and regulators uncover systematic abuse by sophisticated global players, it feels like the game is rigged.

But here’s the thing about market manipulation: it’s real, it happens, and it’s also largely irrelevant to the genuine investor. This isn’t meant to minimise the seriousness of Jane Street’s alleged actions, nor to excuse regulatory failures. Rather, it’s to point out that manipulation thrives in exactly the kind of short-term, speculative trading that sensible investors should avoid anyway.

Also read: Jane Street saga: Lessons for Dalal Street and Parliament Street

The short game

What Jane Street allegedly did was classic short-term arbitrage: buying Bank Nifty stocks early in the day to nudge the index up, while simultaneously shorting index options—betting on the very volatility they helped create. It’s a modern twist on the old pump-and-dump scheme, enabled by lightning-fast algorithms and deep capital pools.

But this strategy only works in short time frames—hours or even minutes. And it thrives in the part of the market that’s become a playground for retail speculation: index derivatives.

Between FY21 and FY24, Sebi data shows 91–93% of retail derivatives traders lost money. Even after new rules kicked in from October 2024, that number hasn’t budged—still 91%. The derivatives casino is designed to enrich a few at the expense of the many.

Investing isn’t trading

The real question isn’t whether markets are manipulated— sometimes they are. The question is whether manipulation should affect your investment decisions.

If you’re buying shares in a well-researched company because you believe in its long-term prospects, does it matter that some algorithm is pushing around index prices for a few hours? If you’re holding a diversified portfolio of quality stocks for years, should you care about daily price movements driven by high-frequency trading?

The answer is no, and here’s why.

Market manipulation exploits short-term price inefficiencies. Manipulators rely on other traders to react quickly to their artificially created price signals. They profit when people buy high and sell low based on immediate price movements. But if you’re not trading on short-term price signals, you’re not participating in the game they’re playing.

Also read: How Jane Street gained from the stock market fall during Operation Sindoor

The basics still work

Buy good businesses. Hold them through cycles. Don’t chase momentum. These principles worked before high-frequency trading, and they still work today. Manipulators might distort prices in the short run—but they can’t alter the intrinsic value of a sound business.

No one can algorithmically destroy a company with solid earnings, a competitive moat, and strong leadership. In the long term, value prevails.

The people most hurt by manipulation aren’t investors—they’re speculators. In FY25 alone, retail traders lost ₹1.05 lakh crore in derivatives. And that’s without manipulation. Add bad actors to the mix, and the odds worsen.

But manipulators can’t touch the long-term investor who’s anchored to business fundamentals, not hourly price charts. That’s the surest protection of all.

Regulation helps, but behaviour matters more

Sebi will investigate, penalise, and perhaps even reform the rules again. But the better solution lies within investor behaviour. Stay out of the derivatives trap. Build a diversified portfolio. Invest for years, not days. That’s how you escape the rigged part of the game entirely.

Also read: Jane Street: Gaming an outdated system is not necessarily illegal in India

Jane Street’s case may eventually be resolved through the courts. But for investors, the takeaway is clear: stick to the timeless principles of investing. Because in the long run, it’s not the manipulators who win—it’s those who stayed the course.

The game may sometimes be rigged, but you don’t have to play it.

Dhirendra Kumar is founder and chief executive officer of Value Research, an independent investment advisory firm