This is outside my domain, and I don’t know the details, but in many cases Jane street functions as a market maker, market makers have access to information they can exploit to skim from anyone that trades through them, especially retail investors who place market orders.
Pump and dump is a strategy that whales can use to bully smaller traders, not unlike how in poker the smaller your stack is in relation to the minimum bet, the easier it is for someone with a big stack to squeeze you out. This is possible for whales even when they don’t have access to the information that market makers have, and it’s not allowed on many regulated exchanges.
It’s like the reverse of the GameStop short squeeze, except instead of retail investors ganging up, propping up the price to liquidate institutional short positions, it’s an institution using its fat stacks to cause little crashes which they have opened short positions to exploit.
One arm of the firm creates a waves in the price, and the other arm rides the wave.
What you're describing isn't a pump and dump, but in any case what Jane Street did wasn't a pump and dump or what you're describing. It also had nothing to do with market making.
India's market trades options much, much more than the underlying stocks. This means that on one hand you can trade a lot of options without moving the market, and on the other you can move the market by trading comparatively few shares. Since options prices tend to be bounded by the price of the underlying, this is...a problem. For example you could buy shares to move the price up, sell calls, buy puts (aka a collar), then sell the shares to move the price back down so both calls and puts make money.
But it doesn't necessarily look like this is what Jane Street was doing. Instead they seem to have realized that stock and option prices already regularly diverged, and put the collars on to profit from corrections. In other words: arbitrage. Which, fair, can be functionally indistinguishable from market manipulation. But on paper it looks like they made prices better for everyday folks at the expense of the market makers and other institutions.
Matt Levine wrote a long Money Stuff column about this around the middle of last year.
Being a market maker doesn't provide any special information. I'm guessing someone misunderstood something like Level II quotes (https://www.investopedia.com/articles/trading/06/level2quote...) as being information that hedge funds / investment banks / pros have that retail traders don't... but it's just semi-public information that anyone can pay for access to.
Jane Street also isn't doing pump and dumps, they're not in crypto discord channels hyping some coin or running bot farms of twitter accounts to talk up some stock.
They run several different types of trading that might interact with other people attempting pump & dumps though, which could impact in either direction- plausibly they might do a momentum trade that follows the direction of movement or they might recognize a price discrepancy happening and trade against it.
More accurately, they have complex models pulling in many, many signals to inform trading, and I'm being a bit reductionist to categorize it as these two things.
This is outside my domain, and I don’t know the details, but in many cases Jane street functions as a market maker, market makers have access to information they can exploit to skim from anyone that trades through them, especially retail investors who place market orders.
Pump and dump is a strategy that whales can use to bully smaller traders, not unlike how in poker the smaller your stack is in relation to the minimum bet, the easier it is for someone with a big stack to squeeze you out. This is possible for whales even when they don’t have access to the information that market makers have, and it’s not allowed on many regulated exchanges.
It’s like the reverse of the GameStop short squeeze, except instead of retail investors ganging up, propping up the price to liquidate institutional short positions, it’s an institution using its fat stacks to cause little crashes which they have opened short positions to exploit.
One arm of the firm creates a waves in the price, and the other arm rides the wave.
Please correct me if I’m wrong.