High-frequency trading (HFT) firms in India have demonstrated remarkable resilience and posted robust profit growth, even in the face of escalating regulatory curbs imposed by the Securities and Exchange Board of India (SEBI). This performance underscores their agility in leveraging opportunities within the country’s vast $5.4 trillion equity market, solidifying India's growing allure for sophisticated market makers.

Leading this surge, Hudson River Trading LLC reported an impressive 156% increase in profit for the fiscal year ending March 31, alongside a 155% jump in revenue. Other significant players, including Optiver Holding BV and homegrown firms like AlphaGrep Securities Pvt and Graviton Research Capital LLP, also recorded substantial growth for the period. These strong results come despite SEBI's measures to temper retail speculation in derivatives markets, which include limiting weekly contracts, charging upfront for options premiums, and increasing contract sizes. The regulator also took assertive action, imposing a temporary ban on Jane Street Group in July, alleging manipulative transactions, an accusation the firm has denied. Simultaneously, SEBI has focused on bolstering cash markets, expanding exchange-traded funds (ETFs), and deepening commodity derivatives.

The financial figures highlight individual firm success: Hudson River Trading posted a profit of approximately 22 billion rupees ($246 million) on revenues of 31.4 billion rupees. Graviton, a key player in cash equities, saw its profit increase by 17% to nearly 12 billion rupees. AlphaGrep experienced a significant 77% profit jump to 4.74 billion rupees. Dutch firm Optiver marked a $44 million profit in its inaugural full year in India, successfully reversing initial losses. It's important to note that these reported figures may not exclusively reflect income generated solely within India for these globally operating firms.

The continued success of HFT firms is largely attributed to their strategic focus and operational capabilities. According to Sanchit Suneja, chief strategy officer at Motilal Oswal Financial Services Ltd., futures and options trading remains the most significant segment for HFT firms due to the high volumes involved. He noted that algorithmic trading alone accounts for over 50% of the total trading volume by value in the equity derivatives segment on the National Stock Exchange. Beyond derivatives, algorithmic traders are also profiting from market making activities on exchange-traded funds and cash-to-futures arbitrage. Proprietary traders collectively accounted for approximately 50% of options turnover, around 30% of cash equity trading, and roughly 35% of futures turnover in the latest fiscal year.

In response to evolving market dynamics and regulatory changes, HFT firms are actively adapting their strategies, exploring multi-frequency approaches and diversifying into other market segments. This period has also seen a shift in retail investor behavior, with smaller participants increasingly moving away from derivatives. Ishan Bansal, CFO of digital broker Groww, highlighted a