Fed, BoE Intensify Scrutiny After Jane Street Loss

Jane Street lost about $15 billion in July 2026, its first negative month since 2016, tied to an AI and chip stock sell-off. The Federal Reserve and Bank of England are questioning global banks on exposure to large trading firms, asking about risk appetite, intraday exposure changes, and risk-control effectiveness. That July, Situational Awareness, an AI-focused hedge fund run by Leopold Aschenbrenner, faced margin calls and sold most of its public equities portfolio to Citadel Securities. In August the SEC subpoenaed Goldman Sachs, JPMorgan, Citigroup and Bank of America over the fund's trading activity and leverage. Jane Street generated more than $40 billion in net trading revenue through mid-August 2026. The episode has renewed debate over the systemic importance of Jane Street, Citadel Securities, Susquehanna and Hudson River Trading, specialist firms that grew rapidly after 2008 as banks retreated from proprietary trading. The Prudential Regulation Authority flagged rising intraday exposures in its April 2026 business plan. The Bank of England examined rapid growth of Asian equity financing by London-based prime brokers after gains in SK Hynix. Regulators can require banks to hold additional high-quality liquid assets if risk is deemed excessive. No factual disputes appear in the record. Whether banks will face higher liquidity buffers is unresolved.