Fed, BoE probe banks' exposure to trading firms after Jane Street loss, FT reports

The US and ​UK central banks have asked ‌global ​banks about their exposures to large trading firms after turmoil at a hedge fund caused ‌large losses at proprietary trading firm Jane Street in July, the Financial Times reported on Monday.

The AI-focused Situational Awareness fund, run by former OpenAI researcher Leopold ‌Aschenbrenner, was forced to sell most of its public equities portfolio to ‌Citadel Securities after a sharp selloff in AI and chip stocks in July. Jane Street lost roughly $15 billion that month, particularly through its investment in the hedge fund ⁠and other technology ​holdings.

The central ⁠banks are 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 Bank of England and the US Federal Reserve declined to comment. ⁠Jane Street ​did not immediately respond to a Reuters request for comment.

Last month, 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.