Fed, BoE probe banks’ exposure to trading firms

Business Recorder, citing the Financial Times, reported that the Federal Reserve and the Bank of England are questioning global lenders over their links with major trading houses. The move follows heavy losses at Jane Street, a proprietary trader that lost roughly $15 billion in July, mainly through its stake in a hedge fund and in technology assets. Reuters said it was unable to confirm the report, and neither central bank commented on it.

The inquiry reportedly covers the trading firms' appetite for risk, how bank exposures shifted during the trading day, and how risk controls worked. Separately, Situational Awareness, an AI-focused fund led by former OpenAI researcher Leopold Aschenbrenner, had been compelled to offload the bulk of its listed shares to Citadel Securities after a sharp drop in AI and chip equities during July.

Last month, the Securities and Exchange Commission served subpoenas on major Wall Street banks, among them Goldman Sachs, JPMorgan, Citigroup and Bank of America. The regulator is reviewing the fund's trading activity and use of leverage after its near-collapse, including transactions that set off margin calls and its dealings with creditors.