Jane Street's US$15 billion loss prompts Fed, BoE scrutiny of banks' trading-firm exposure: FT

Key Points:

• The Bank of England and US Federal Reserve are investigating global banks' exposures to large trading firms following significant losses linked to the AI-focused hedge fund Situational Awareness.
• Situational Awareness, managed by former OpenAI researcher Leopold Aschenbrenner, was forced to liquidate most of its public equities to Citadel Securities in July amid a sharp sell-off in AI and chip stocks, causing Jane Street to incur a $15 billion loss.
• Central banks are gathering data on trading firms' risk appetites, intraday exposure changes, and risk control mechanisms to assess potential systemic risks.
• The US Securities and Exchange Commission subpoenaed major Wall Street banks to probe Situational Awareness' trading activities, leverage use, margin calls, and lender communications following the fund's near-collapse.
• Reuters could not independently verify these developments, and involved parties including the Federal Reserve, Bank of England, and Jane Street have not commented publicly.