Fed, BoE Investigate Bank Exposure to Trading Firms After Jane Street Loss

The US Federal Reserve and Bank of England are intensifying their scrutiny of bank exposure to large trading firms after Jane Street suffered significant losses due to its dealings with Situational Awareness, a hedge fund focused on AI research.

Jane Street took a $15 billion hit in July when Situational Awareness was forced to sell most of its public equities portfolio to Citadel Securities following a sharp sell-off in AI and chip stocks.

The central banks are now seeking information from global banks about their exposures to trading firms, including their risk appetite, how exposure evolved throughout the day, and how risk controls operated.