Fed, BoE probe banks’exposure to trading firms after Jane Street loss
The central banks are seeking information on the trading firms' risk appetite
The Federal Reserve and Bank of England are investigating global banks' exposure to large trading firms following significant losses incurred by proprietary trading firm Jane Street in July. According to the Financial Times, the banks are being asked about their risk appetite, how their exposure to the firms evolved throughout the trading day, and how their risk controls operated.
The investigation stems from the sharp selloff in AI and chip stocks in July that forced Jane Street to sell most of its public equities portfolio to Citadel Securities, resulting in a $15 billion loss for the firm. The central banks are seeking information from the trading firms, but Reuters could not independently verify the report.
The Bank of England and US Federal Reserve did not comment on the matter, and Jane Street declined to provide a comment to Reuters. In a separate matter, the US Securities and Exchange Commission recently subpoenaed several Wall Street banks, including Goldman Sachs, JPMorgan, Citigroup, and Bank of America, to examine Situational Awareness' trading activity and use of leverage following the hedge fund's near-collapse.
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