Fed and BOE Scrutinize Banks Over Trading Firm Exposure After $15 Billion Jane Street Loss
The US Federal Reserve and Bank of England are scrutinizing banks' exposure to large trading firms following a significant loss at Jane Street, caused by turmoil at AI-focused hedge fund Situational Awareness.
According to a report in the Financial Times, central banks are seeking information on risk appetite, how banks' exposure to these firms evolved throughout the trading day, and how risk controls operated. The request comes after Jane Street took a $15 billion hit due to Situational Awareness selling most of its public equities portfolio to Citadel Securities.
Last month, the US Securities and Exchange Commission subpoenaed Wall Street banks, including Goldman Sachs, JPMorgan, Citigroup, and Bank of America, examining Situational Awareness' trading activity and use of leverage following its near-collapse.