Morning Coffee: How 26-year-old Jane Street traders make huge profits (allegedly). Goldman Sachs fixed itself up for future bonuses

When Daniel Spottiswood, a 26 year-old ex-Jane Street trader and Doug Schadewald, his 30-year-old colleague were in court last year after allegedly selling secrets about an Indian options trading strategy to hedge fund Millennium, the exact nature of this strategy was never revealed. It was, however, supposed to be abnormally profitable: Jane Street said the two young traders could make $150m in three months alone (Spottiswood and Schadewald disputed this and said it was closer to $4m).  

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It's still not clear exactly how Spottiswood and Schadewald were making these allegedly enormous amounts. Their case was settled before such details were aired. But a new order from the Securities and Exchange Board of India (SEBI) indicates how such things might come to pass. 

Jane denies any wrongdoing, but SEBI says the electronic trading firm - which likes to employ top performing graduates from top universities- made $4.3bn from "sinister" trading in the Indian derivatives and cash market during the period between January 2023 and March 2025, and that it did so by manipulating the market at the expense of small investors.  

Specifically, SEBI claims that on index expiry days, when futures contracts based on indices must be settled in cash, Jane Street would make very large purchases of the component stocks in India's 'Bank Nifty Index' in the morning, while assembling short positions in index options at the same time. 

At the end of the expiry days, SEBI says Jane Street would suddenly sell its positions in the component stocks. This would push prices down for retail investors who'd invested while the prices were rising, while allowing Jane Street to profit from its simultaneous short positions in the index options market. "Essentially, the player pre-positioned massive sizes in index options on weekly expiry days by buying or selling its constituent stocks to suit its positions in index options," claims The Ken, an Indian business news website. Jane Street was "enticing unsuspecting entities trading in BANKNIFTY index options to trade at interim levels that were artificial and temporary,” claims SEBI. 

SEBI has temporarily barred Jane Street from accessing the Indian market entirely. The Ken suggests this has implications for Jane Street's operations beyond India: Jane Street's operations in Hong Kong, London and Singapore are also registered as portfolio investors in India and SEBI is understood to be scrutinizing entities overseas. Singapore's Straits Times notes that Jane Street has 21 days to object. 

For its part, Jane Street says it was merely removing "unwanted delta," from the Indian market, where delta refers to the changing price of an option as the price of the underlying asset changes. It might be argued that this is simply what quant trading firms do. Maybe Jane Street was simply too big for the Indian market? Now that it's banned from operating in India, its 26-year-old traders will need to find somewhere else to make huge profits instead.  Jane Street employs nearly 3,000 people and pays them an average of $1.4m each, so people working for the firm are strongly incentivized to find an alternative.   

Separately, when Goldman Sachs faced steep capital requirements this time last year, the Financial Times said this reflected the regulator's belief that Goldman might lose $40bn in a severe downturn and that Goldman was arguing this wouldn't happen because it would simply cut bonuses and other costs instead. 

One year on, the FT notes that Federal Reserve has dramatically revised the amount it thinks Goldman would lose in a downturn to just $300m. This has enabled the firm to reduce its tier one capital ratio from 13.6% to 10.9% of risk weighted assets and to increase its dividend by 33%.

How has this occurred? The FT notes that Goldman was helped by the fact that the Fed is no longer considering private equity investments in its stress test and that Goldman is heavily exposed to PE. 

The change is good news for Goldman's share price, and good news for Goldman Sachs' traders, who are now less hampered by onerous capital requirements. It's good news for any Goldman staff holding stock from previous bonus rounds. Will it be good news for future bonuses? Surely. Unless Goldman does very lose tens of billions, at which point the firm will need to jettison costs and bonuses in the manner it was suggesting last year.  

Meanwhile...

Barclays is halfway through its three-year plan to boost returns and cut reliance on its investment-banking arm. Analysts aren't so sure it will work. The investment bank is meant to produce a return on tangible equity of about 12%; analysts predict 10.4% in 2026. Its ratio of costs to revenue is meant to fall to a percentage in the high-50s; analysts forecast 64%. (Bloomberg) 

Deutsche Bank restructured its investment bank so that it's based on regions instead of products. There are new leaders for the regions, but no one is leaving. (Bloomberg) 

Barclays got some made Richard Satchwell head of capital markets financing for the Asia-Pacific region and relocated him to Singapore. It also made Ee-Ching Tay head of M&A for APAC. “This team will drive the next phase of our ambition.” (Bloomberg) 

Lazard hired Cyrille Cotte from Evercore as head of its European financial institutions group. (Bloomberg) 

Time-honored trading patterns prevailed in the first half of 2025 and quant funds had a fine time. Marshall Wace’s TOPS, Renaissance Institutional Equities Fund and AQR Delphi Long-Short Equity, all climbed about 11%. (Bloomberg)  

Chris Hohn’s hedge fund TCI has generated 21% returns, versus 2.5% and 2.2% at Citadel and Millennium. (Financial Times) 

Being a non-executive director is suddenly a lot more work. There's always a crisis on the horizon. (Bloomberg) 

“Artificial intelligence is going to replace literally half of all white-collar workers in the U.S..” (WSJ) 

JPMorgan is creating a new global head for its private bank because it says very rich people think they are global now. “The wealthier you get, the more you feel you’re a citizen of the world. If that doesn’t happen with the first generation of a family, it starts to happen with the second and the third.” (WSJ) 

Young people can't be bothered with extreme work. Aged 22, one data analyst said he anticipated working 80 hours a week. Now he's 27, he's not so sure. “I worried about being 40 or 50 and not having any interests outside of work.” (WSJ)  

Hull cocaine dealer's array of motivational messages. "Get this town rocking!," "I am on all night." (HullDailyMail)  

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