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A New Era of Accountability in Asia’s Capital Markets

Written by Jonathan Dixon

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Asia’s capital markets have grown significantly over the past decade and are now home to around 55% of the world’s listed companies, with a combined market capitalisation of $34 trillion USD. The subsequent surge in liquidity and trading activity creates more opportunities for institutional and retail investors. But, as trade volumes rise, so too does the risk of market abuse.

Growth must be tempered by a commitment to fair and equitable trading, promoted through strong regulatory foundations, robust enforcement, and close cooperation between regulators, law enforcement, and the private sector.

Supervisors across the region have demonstrated their desire to stamp out manipulative trading in recent months. In this article, we break down the key stories and share our thoughts on what this means for Asia’s market participants.

Jane Street Group: How SEBI caught a billion-dollar index manipulation

India’s capital markets were rocked in April 2024 when media reports surfaced about Jane Street Group’s alleged misuse of proprietary trading strategies in index options. The Securities and Exchange Board of India (SEBI) sprang into action, launching an immediate probe and directing the National Stock Exchange (NSE) to dig into Jane Street’s trades.

Here’s the strategy Jane Street used:

  • In the morning: Jane Street aggressively bought up BANKNIFTY stocks and futures, artificially propping up the index. Meanwhile, they loaded up on bearish options, buying puts and selling calls while the rest of the market watched the index climb.
  • In the afternoon: With their options positions set, Jane Street dumped the stocks and futures, sending the index plunging. The options trades earned massive profits, easily outstripping any losses on stocks and futures.

How SEBI Tracked the Manipulation:

SEBI and the NSE analysed minute-by-minute trades across Jane Street’s Indian affiliates. The regulator focused on the 30 most profitable days (nearly all expiry days), mapping out profits and losses. Total profits were equal to ₹36,502 crore (~ USD 5 billion).

SEBI flagged two core tactics:

  • “Intra-day Index Manipulation”: the morning-pump, afternoon-dump
  • “Extended Marking the Close”: pressuring the index right up to close

Even after SEBI cautioned Jane Street via the NSE, warning them to rein in their trades, the group kept pushing massive positions. SEBI concluded this was coordinated market manipulation, violating India’s Prohibition of Fraudulent and Unfair Trade Practices (PFUTP) rules. SEBI’s deep dive, powered by granular market data, offers a blueprint for catching bad actors and limiting their ability to tilt the market.

South Korea launches “one-strike-out” rule to crack down on illegal stock trading

South Korea is stepping up its fight against illegal stock trading with a bold new “one-strike-out” policy. Announced by the Financial Services Commission (FSC), Financial Supervisory Service (FSS), and Korea Exchange (KRX), the rule means anyone caught manipulating markets or engaging in unfair trading practices faces immediate and permanent expulsion from the market, with no second chances.

A joint inspection team will enable real-time monitoring and swift investigations. If illegal activity is detected, authorities will instantly freeze suspect accounts to stop illicit profits from being moved, and violators will face fines up to twice their illegal gains.

The new policy aims to boost global investor confidence and streamline enforcement by shifting surveillance from account-based to individual-based tracking, making it easier to spot links between accounts. Additional measures will tighten listing standards and protect minority shareholders. This marks a major step toward a fairer, more transparent Korean stock market.

Reflecting on 2025 so far

Elsewhere, our analysis of recent enforcement activity shows a trend amongst Asian regulators, who have been stepping up oversight to match the scale and complexity of their capital markets.

Key developments from our recent quarterly updates include:

  • High-profile insider trading cases: Hong Kong authorities have pursued several headline cases, including one where a chauffeur’s tip-off led to an investigation and penalties.
  • Ongoing crackdown on market manipulation: Singapore’s MAS imposed more than $600,000 in penalties against multiple individuals for false trading and unauthorised account use in a coordinated pump-and-dump scheme.
  • Wash trading and masking risks: Hong Kong’s SFC continues to ban individuals for practices such as wash trading, often used to disguise margin call risks.
  • Data integrity and trade reporting: Regulators across the region are focusing on data quality and accurate trade reporting, with enforcement targeting failures in recordkeeping and reporting systems.

A New Standard for Market Participants

Supervisors in Asia are leveraging every tool at their disposal (policy, advanced analytics, and robust enforcement) to set clear expectations for market participants. Firms are now expected not only to uphold high standards of market conduct, but also to actively support regulators in their mission to detect and deter illicit trading.

We identify five key implications for firms:

  • Advanced analytics are essential: Robust surveillance systems are required to detect, prevent, and evidence potential misconduct before it escalates to regulatory attention.
  • Compliance must be end-to-end: Beyond analytics, firms need well-documented procedures, timely reporting, and proactive self-disclosure.
  • Cooperation and transparency matter: Asia’s Regulators reward early self-reporting and demonstrable remediation, often with reduced penalties.
  • Zero tolerance is the new normal: Whether it’s the permanent exclusion for market manipulation in Korea or strict bans and penalties elsewhere, firms should expect less leniency and greater consequences for breaches, no matter how complex or cross-border the activity.
  • Investor trust is at stake: Maintaining strong standards is fundamental to sustaining global investor confidence and ensuring continued growth for Asia’s markets.

At eflow, we help firms simplify surveillance, automate control testing, and prepare confidently for the future of regulation, anywhere in the world. To learn how we can support your compliance strategy, book a consultation or explore our solutions here.