A roughly $15 billion trading hit at Jane Street is becoming a bank-supervision issue, with the Federal Reserve and Bank of England reportedly asking global banks how much exposure they carry to major nonbank trading firms and how those positions behave during fast-moving market stress.
The inquiries follow July’s collapse in AI and semiconductor stocks, which forced Leopold Aschenbrenner’s AI-focused hedge fund Situational Awareness to sell most of its public-equity portfolio to Citadel Securities. Jane Street, an investor in the fund, suffered losses through that investment as well as other technology positions.
The Financial Times reported that the Fed and BoE are seeking information on banks’ risk appetite toward large trading firms, changes in exposure during the trading day, and whether internal controls operated as intended.
Sponsored · Selkirk Copper Mines
That shifts the regulatory question beyond what went wrong at Situational Awareness. The focus is increasingly on the banks providing financing and market access to firms capable of carrying enormous positions outside the traditional banking system.
The Bank of England said in its July Financial Stability Report that global hedge-fund equity prime-brokerage balances had risen roughly 40% over the previous year to record levels, while positions had become more concentrated in sectors including semiconductors. It warned that leveraged funds forced to unwind positions could transmit losses to prime brokers and other markets.
The Federal Reserve separately said in May that hedge-fund leverage remained at record-high levels in the period covered by its data.
US regulators are also examining the July episode itself. The SEC subpoenaed Goldman Sachs, JPMorgan Chase, Citigroup, and Bank of America, according to Reuters. The regulator is examining Situational Awareness’s trading, leverage, margin calls, and communications with lenders.
Jane Street remained profitable for 2026 despite the setback. The firm had already generated more than $40 billion in trading revenue year to date, exceeding its $39.6 billion total for all of 2025. July was its first negative trading month since 2016.
