Fed and Bank of England question banks after Jane Street’s trading loss

The Federal Reserve and Bank of England are asking global banks how exposed they are to large trading firms, following a market shock that reportedly left Jane Street with a roughly $15 billion loss in July. The trigger was the near-collapse of Situational Awareness, an AI-focused hedge fund that had to sell most of its listed-stock portfolio after a sharp retreat in AI and chip shares. Regulators want to know not simply how much banks had lent or traded with such clients, but how that exposure changed during the day and whether safeguards would contain a fast-moving loss. The inquiry reflects a broader concern: firms outside the traditional banking system can still transmit stress to banks when they rely heavily on bank financing and trading services.