Jane Street’s US$15 billion loss prompts Fed, BoE scrutiny of banks’ trading-firm exposure: FT

THE Bank of England and the US Federal Reserve are asking global banks about their exposures to large trading firms after turmoil at hedge fund Situational Awareness caused large losses at Jane Street, the Financial Times reported on Monday (Sep 21).

The AI-focused fund, run by former OpenAI researcher Leopold Aschenbrenner, was forced to sell most of its public equities portfolio in July to Citadel Securities after a sharp sell-off in AI and chip stocks. This contributed to Jane Street taking a US$15 billion hit that month.

The central banks are now seeking information on the trading firms’ risk appetite, how banks’ exposure to them evolved throughout the trading day, and how risk controls operated, the FT report said, citing people familiar with the matter.

Reuters could not immediately verify the report. The US Federal Reserve, the Bank of England and Jane Street did not immediately respond to a Reuters request for comment outside of business hours.

In August the US Securities and Exchange Commission subpoenaed Wall Street banks, including Goldman Sachs, JPMorgan, Citigroup and Bank of America. It was examining Situational Awareness’ trading activity and use of leverage following its near-collapse, including the trades that triggered margin calls and the fund’s communications with lenders. REUTERS