High-Frequency Trading Firms Surge Profits in India Despite Regulatory Curbs

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High-frequency trading firms in India are posting impressive profit gains, demonstrating their ability to navigate the country’s $5.4 trillion equity market despite tighter regulatory measures.

Hudson River Trading LLC led the pack with a 156% jump in profits for the fiscal year ending March 31, according to corporate filings. Other major players, including Optiver Holding BV and domestic firms AlphaGrep Securities Pvt. Ltd. and Graviton Research Capital LLP, also reported strong growth.

The results underscore India’s rising attractiveness to market makers, even as the Securities and Exchange Board of India (SEBI) implements curbs to rein in retail speculation in derivatives. At the same time, regulators are expanding ETFs, strengthening cash markets, and deepening commodity derivatives to foster broader market development.

The fiscal year concluded roughly five months after SEBI imposed limits on derivatives trading, such as restricting weekly contracts to one index per exchange, mandating upfront payment of options premiums, and increasing contract sizes. In July, SEBI also temporarily banned Jane Street Group over alleged manipulative trades in options and shares, charges the firm has denied. Jane Street and Citadel Securities LLC have yet to release their performance figures.

Even with these restrictions, futures and options remain a core revenue driver for HFT firms. “Futures and options trading has been the largest segment for HFTs given the volumes involved,” said Sanchit Suneja, Chief Strategy Officer at Motilal Oswal Financial Services. He added that algorithmic trading accounts for over 50% of total trading value in the equity derivatives segment on the National Stock Exchange.

Hudson River reported profits of around 22 billion rupees ($246 million), with revenue rising 155% to 31.4 billion rupees. Graviton, a leading cash equities trader, saw profits grow 17% to nearly 12 billion rupees, while AlphaGrep’s profit jumped 77% to 4.74 billion rupees. Dutch firm Optiver posted a $44 million profit in its first full year in India, rebounding from losses in its initial six months. These figures may not exclusively reflect domestic revenue.

Algorithmic traders are also benefiting from market making in ETFs and cash-to-futures arbitrage, Suneja noted. Proprietary traders accounted for roughly half of options turnover, 30% of cash equity trading, and 35% of futures activity in the latest fiscal year.

HFT firms are adapting by exploring multi-frequency strategies and diversifying into new market segments, even as smaller retail investors scale back their derivatives exposure. “There is a churn in users,” said Ishan Bansal, CFO of digital broker Groww, during a recent earnings call. The firm reported a 10%–20% rise in average order value per user in derivatives, driven by smaller participants moving away from futures and options.