The Indian markets regulator's ban on Wall Street trading giant Jane Street has squeezed volumes in the country's options market, but traders expect activity to snap back as larger investors step in.

A temporary trading ban imposed by India’s securities regulator on Jane Street Group LLC is fueling concerns that volumes in the nation’s bustling derivatives market may drop, hurting business at the top exchange.

As quant trading firm Jane Street faces regulatory heat in India, corporate filings show that its two local units—JSI Investments and JSI2 Investments—appear to be thinly staffed and are effectively controlled by foreign executives.