Central Banks Scrutinize Bank Exposure to Trading Firms After Jane Street Loss

The US Federal Reserve and the Bank of England are increasing their scrutiny of banks' exposure to large trading firms after a significant loss at Jane Street, according to a report by the Financial Times.

The turmoil was caused by the near-collapse of hedge fund Situational Awareness, which was forced to sell most of its public equities portfolio to Citadel Securities due to a sharp sell-off in AI and chip stocks. This resulted in a $15 billion loss for Jane Street last month.

Central banks are now seeking information on trading firms' risk appetite, how banks' exposure evolved throughout the trading day, and how risk controls operated. The US Federal Reserve, the Bank of England, and Jane Street have not commented on the matter.