{"text":[[{"start":6.36,"text":"Leopold Aschenbrenner’s August wedding arrived at the end of one of the most difficult weeks of his life."}],[{"start":12.64,"text":"By the time he kissed his bride under an altar fashioned from burgundy hydrangeas and blush chrysanthemums, the 24-year-old had already suffered heavy losses at his Situational Awareness hedge fund and been forced into a sale of its positions."}],[{"start":27.12,"text":"His sudden fall from grace was also a heavy blow to at least one other notable wedding guest: Rob Granieri, the 54-year-old co-founder of Jane Street Capital."}],[{"start":37.32,"text":"Granieri’s presence at Aschenbrenner’s nuptials reflected the close ties between the juvenile hedge fund and one of Wall Street’s premier trading firms."}],[{"start":46.04,"text":"Jane Street had invested heavily in Situational Awareness; a former employee at Jane Street works at the AI-focused fund; and it was exposed to many of the same AI-linked stocks that Aschenbrenner had bought, including Sandisk, Nebius and Bloom Energy."}],[{"start":62.28,"text":"But the bets soured, leading Jane Street to lose money over a month for the first time in a decade. The stake in Aschenbrenner’s fund and positions in AI stocks were the main factors behind a massive $15bn loss in trading revenues, after a bruising sell-off in the sector during July."}],[{"start":null,"text":""}],[{"start":80.32,"text":"The loss was a stunning reversal for a firm whose returns had become the envy of Wall Street. It also made clear just how far the secretive company has evolved from its roots as a nimble market maker and arbitrage trader, profiting from tiny differentials in asset prices over fractions of a second."}],[{"start":97.44,"text":"Today, it is one of the largest financial institutions in the US and it takes massive bets over longer horizons, increasing the risk to its balance sheet, lenders and regulators, who keep a close eye on outfits the size of Jane Street for the market dislocations they could cause."}],[{"start":113.36,"text":"“When you start seeing the kind of revenue these guys are putting up, the only way that’s possible is when your holding period extends as well as the size,” says Larry Tabb, head of market structure research at Bloomberg Intelligence. “The problem with that is your clarity on the future declines."}],[{"start":null,"text":""}],[{"start":129.6,"text":"“The longer your holding period, the more chance that something you can’t forecast occurs.”"}],[{"start":135.48,"text":"In an August letter to its employees discussing the losses, the firm admitted it was not protected against some of the market moves that served to undo its July performance. “The losses in AI stocks were relatively spread out throughout the month, [and] short-term hedges provided little help,” wrote Turner Batty, a partner at the firm."}],[{"start":155.56,"text":"The firm had in June warned its bank lenders and certain employees that large losses were possible, according to a person briefed on the matter. Unlike other risk-taking hedge funds, which have outside investors, Jane Street is a proprietary trading firm where the profits — and the losses — are shared among senior staff."}],[{"start":174.34,"text":"The FT spoke to more than a dozen current and former employees, as well as analysts and other Wall Street firms familiar with Jane Street’s evolution. Jane Street itself declined to comment."}],[{"start":185.84,"text":"Its tilt into large and lengthy wagers and its headlong embrace of the AI trade, including the Aschenbrenner investment, comes as the firm has achieved fearsome scale, according to Paul Rowady, director of research for Alphacution."}],[{"start":null,"text":""}],[{"start":198.72,"text":"The shift in the firm’s strategy reflects its meteoric record — trading gains reached $40bn in 2025 — and a growing warehouse of market positions it cannot easily close out at the end of a day, says Rowady."}],[{"start":212.4,"text":"“You’re trading slower. You have bigger positions, they absorb more capital,” he adds. “It’s a different animal.”"}],[{"start":212.9,"text":"Triumph of the nerds"}],[{"start":219.96,"text":"People who have worked with Granieri describe him as the personification of Jane Street: an oddball possessing formidable intellect, yet a most unlikely figure to become a Wall Street titan."}],[{"start":231.7,"text":"The last of Jane Street’s four founders who still works at the 26-year-old company, Granieri is its de facto leader even though there is no formal chief executive position."}],[{"start":241.4,"text":"He keeps a low profile internally, so much so that some employees report having had conversations with him without knowing that he was the boss."}],[{"start":249.26,"text":"“As much as they like to pretend he’s not the guy, he’s the guy,” says one person familiar with Jane Street."}],[{"start":254.76,"text":"An eccentric and a billionaire many times over, Granieri likes to flout convention — for instance, by ordering steak for dessert at company dinners, or simply asking a server to bring another helping of an entire meal. He is a regular at the countercultural Burning Man desert festival and made headlines last year for unknowingly financing a militia that was plotting a coup in South Sudan."}],[{"start":277.6,"text":"Granieri also owns a casino, and visitors to Jane Street’s New York headquarters say its trading floor sounds like an amusement arcade. Traders use more screens than it is possible to monitor at one time, and rely on audio alerts to draw their attention to news or price movements."}],[{"start":null,"text":""}],[{"start":293.68,"text":"The result is a cacophony of arcade noises, animal calls, car horns and the occasional quote from a cartoon character, all going off at multiple trading stations at any one moment."}],[{"start":304.76,"text":"During the pandemic when employees were working from home, frustrated partners and roommates insisted that Jane Street traders get headphones. Jane Street even had to explain to job applicants during interviews that the background din was the sound of work, not video games."}],[{"start":320.16,"text":"The noise belies a firm that seeks to stay as quiet as possible. For Jane Street insiders, discretion is a competitive advantage. Bragging, even casually to an acquaintance over drinks, about money being made in some obscure corner of the sovereign debt market could crowd out the trade."}],[{"start":336.64,"text":"This penchant for secrecy spilled out into public view a few years ago, when Jane Street sued to stop two former employees from replicating its strategy for trading options in India."}],[{"start":347.4,"text":"Taking risks was encouraged, so long as there was nothing wagered that could jeopardise the company’s survival. “Jane has no problem piling in and making a shit ton,” said one former employee about the firm’s appetite for big bets."}],[{"start":360.28,"text":"Jane Street’s basic strategy has been to hire mathematical prodigies from elite east coast universities to spot and exploit inefficiencies in market prices — and keep them happy enough that they would never leave."}],[{"start":371.6,"text":"“It’s just recruiting,” says one former employee of Jane Street’s success. “They hire the best people in the world for what they do and they don’t fuck that up.”"}],[{"start":380.04,"text":"But the firm’s faith in some precocious traders has come back to haunt it. One who previously caught Granieri’s eye was a young Sam Bankman-Fried, who went on to found the FTX cryptocurrency exchange and was last year sentenced to 25 years in prison over his role in its collapse."}],[{"start":398.8,"text":"Jane Street also committed heavily to Aschenbrenner’s fund even as many others on Wall Street turned him down for his lack of trading experience."}],[{"start":406.44,"text":"Rowady says: “The fact that they would double down by becoming a limited partner in this Situational Awareness fund . . . it’s not only unprecedented, but it’s like, well, why?”"}],[{"start":null,"text":""}],[{"start":406.94,"text":"Riding the tide"}],[{"start":419.08,"text":"Jane Street began life in the early 2000s trading American depositary receipts, instruments that allowed US investors to own and trade shares in overseas companies. But its genuinely massive hauls have come in recent years after seismic shifts in financial markets."}],[{"start":435.84,"text":"The first was an explosion in the market for exchange traded funds, which had $22tn in assets under management globally at the end of April, according to data from JPMorgan."}],[{"start":447.16,"text":"Millions of ordinary investors have flocked to the mainstream ETFs that track benchmark stock indices because they are cheap to own and easy to trade."}],[{"start":455.5,"text":"But alongside these trackers, some of which are approaching $1tn in assets, sits a huge range of funds that offer targeted exposure to things as diverse as petcare companies and the stock trades of Democratic and Republican lawmakers."}],[{"start":469.563,"text":"The US now has more ETFs listed than individual company stocks, and Jane Street trades more than 10,000 of them globally, almost two-thirds of the roughly 17,000 listed worldwide."}],[{"start":480.84,"text":"It is an authorised participant — engaged by ETF providers to help run the creation and redemption process that keeps an ETF’s share price more or less in line with the sum of its holdings."}],[{"start":null,"text":""}],[{"start":491.7,"text":"The firm was not afraid to dive into complex fixed-income ETFs, which can hold niche securities such as securitised corporate loans or mortgage-backed bonds. It has come to dominate the sector just as the machinery of electronic and bulk trading has transformed fixed income, with buying and selling over the phone largely replaced by automated trading."}],[{"start":511.44,"text":"Jane Street uses its perch in the market to devise specific long-short trades based on the quantitative information that it is gathering."}],[{"start":518.56,"text":"“They set up trades because they get tremendous data from all this,” says one credit hedge fund manager, who places orders through Jane Street. “They take big directional risks.”"}],[{"start":530.92,"text":"In recent years, the firm has also positioned itself to capitalise on the rise of retail traders, which now account for 36 per cent of daily equity volume in the US, according to Empirical Research Partners."}],[{"start":544.36,"text":"When this newly consequential cohort of retail investors places orders for equities or options, the brokerages route those to market makers such as Jane Street for execution. The “flow”, or stream of trades from the brokerages, is steady and so valuable that proprietary trading firms pay for access to it."}],[{"start":null,"text":""}],[{"start":564.28,"text":"“That super-soft, sweet flow which companies compete for . . . it can be really informative to know which way the dumb trades are going,” says one former employee."}],[{"start":573.56,"text":"Late last year Jane Street became the third-largest buyer of orders from brokers that serve such investors, according to data from Global Trading."}],[{"start":581.52,"text":"Despite the firm’s secrecy, some mishaps have spilled into public view and led to the kind of attention that the firm prefers not to attract."}],[{"start":589.34,"text":"In 2016, bets on the market reaction to that year’s presidential election went awry, resulting in a loss of $300mn. It was the single worst loss in the firm’s history at that time and came despite a prediction model, devised by Bankman-Fried, correctly calling the result."}],[{"start":607.62,"text":"Last year, Jane Street was banned by the Securities and Exchange Board of India for operating what the regulator described as a “sinister scheme” to “manipulate” cash and futures markets and entice small investors to trade at unfavourable and misleading prices."}],[{"start":622.36,"text":"The firm paid $567mn into an escrow account pending an appeal, which is ongoing, but made more than $4bn on its Indian trades in just over two years. It has said the activities it undertook were “basic index arbitrage” and described the Sebi order as “untenable” and “flawed”."}],[{"start":642.08,"text":"In another public complaint, the bankruptcy administrator of crypto company Terraform sued Jane Street, accusing it of insider trading. The lawsuit alleged that Jane Street insiders, including some former Terraform employees, used material non-public information to front-run trades that hastened Terraform’s collapse."}],[{"start":662.24,"text":"Jane Street has described the case as “desperate” and “a transparent attempt to extract money”."}],[{"start":668.72,"text":"More money and management"}],[{"start":670.6,"text":"Before its latest stumble became public, Jane Street shifted its widely held debt to a smaller number of lenders, in effect limiting the number of parties that received regular details of its financial performance."}],[{"start":681.96,"text":"“They care about losing money,” says Rupak Ghose, an independent adviser who previously worked as a research analyst at Credit Suisse and head of corporate strategy at broking group ICAP. “This loss was so big, and it was only fine because the gain before was strong. But they cannot afford to have losses like this.”"}],[{"start":699.72,"text":"Meanwhile, the firm has a significant focus on growth, which will require ready access to capital."}],[{"start":706.76,"text":"Every trading firm in the world is racing to develop AI capabilities, requiring heavy investment in computing capacity and talent. Both are expensive; new recruits poached from top AI labs can often command basic salaries running into millions of dollars a year."}],[{"start":722.44,"text":"“We’re doing a lot of work to build out our own large-scale data-storage system,” head of technology Yaron Minsky said on a recent podcast appearance. “We have to deal with a diversity of data centres. We simply can’t get all the compute we want in the same place.”"}],[{"start":null,"text":""}],[{"start":737.12,"text":"But Robert Hoban, an analyst at rating agency S&P Global, says the firm may now have to evolve as it grows. “They have certainly been very successful in growing a very profitable, very successful firm,” he says. “They need to demonstrate that they have the wherewithal to manage that over the longer term.”"}],[{"start":755.16,"text":"There are some signs that the firm is already doing so. While still up more than $40bn this year, it has told employees that it will be more “selective” about risk while maintaining a focus on “short time horizon strategies [as] trading seems more profitable than ever”."}],[{"start":770.2,"text":"It has also become more proactive in managing relationships with prime brokers, the divisions of big banks that finance its trading, and increased the size of the buffer it maintains to absorb losses."}],[{"start":782.56,"text":"“We feel . . . they’re moving in that direction,” adds Hoban. “But one indication is that you don’t have any sort of ‘oopsies’ over the course of a period of time. And that track record has not necessarily been as good.”"}],[{"start":795.84,"text":"Some also warn that as Jane Street grows — it now has 3,500 employees worldwide, and plans to increase that — the firm may struggle to rein in the risk-taking culture it previously encouraged and maintain its collegial, less hierarchical management style."}],[{"start":811.64,"text":"“You’ve got a team of trusted employees that have done very well for you over years,” says Tabb of Bloomberg Intelligence. “You give them some leeway. You see what they do. You give them more and you wind up with issues.”"}],[{"start":null,"text":""}],[{"start":null,"text":""}],[{"start":824.96,"text":"Additional reporting by Michelle Chan in New York"}],[{"start":827.92,"text":""}]],"url":"https://audio.ftcn.net.cn/album/a_1787924918_7008.mp3"}