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
International News via Reuters:
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.
Reporting by Abu Sultan in Bengaluru; Editing by Janane Venkatraman and Harikrishnan Nair
