> Jane Street has generated more than $40bn in net trading revenues in the year to Friday, even accounting for the July loss, which exceeds its entire haul for 2025, according to one of the people familiar with the matter.
This would make JS one of the most profitable trading firms of all time even with the loss.
Are they "trading" or "high-frequency-ripping-off-retail-investors"?
It's easy to make paper billions with synthetic shares and infinite deadline extensions for settlement. I'm old and still remember when Ken Griffin was lauded a clever person before he got caught with his hands in the GME mayo jar..
Liquidity providers like Jane Street, Citadel, et al make money on the spread. They also buy order flows from integrators, and retail investor order flows are now a product.
i.e. retail investor → brokerage platform → clearing/execution infrastructure → Jane Street → payment back toward the brokerage side of the chain.
Who captures the economic value created by retail order flow?
Jane Street.
In an ideal market, this product line shouldn't exist. Institutional investors should not be making money on the activity of retail investors.
What incentives determine where that flow is sent, and would investors receive better execution if their orders were exposed to genuinely competitive price formation rather than privately internalised by a concentrated group of wholesalers?
The regulators should be squashing any HFT related or retail order flow, but it's so opaque _by design_ that getting policymakers, or the general public, to understand that retail investors are paying some portion of tax on their $20T USD annual trades to these companies.
Granted, these order flows _sometimes_ work the other way -- and retail users get a better deal on a trade.. But would you really expect the market to be worth what it is, if that was the case less more often than not?
There is a clear and obvious conflict: the broker is supposed to seek the best execution for the customer while potentially being paid by the firm receiving that customer’s order. How can that be, when the broker's in bed with the liquidity providers?
HFT raises pricing for retail traders by allowing front running of trades and makes the market less competitive overall for those without the infrastructure to do so. This isn’t even in question.
It's very much in question. As much as I hate to admit that since I do not like the concept of HFT existing as it's not providing very much value to society (imo) compared to the money made. The intellectual power behind this stuff would be much better put to use for something productive.
It likely lowers the transaction costs due to adding liquidity and narrowing bid/ask spreads for small retail orders.
But indirectly it likely raises costs for institutional investors like pension funds and large ETF managers making giant block trades on behalf their beneficiaries.
So tldr; Probably fractionally better pricing for your $5k GOOG trade, fractionally worse for your VOO holdings over the long term.
Does it really hurt institutional traders? How? Is it based on the idea that they can’t get the retail spreads? Because there is no world where they would have ever gotten them. A market maker would loose money doing that.
I'm certainly no expert whatsoever. This is just my understanding from talking with a few folks I consider quite smart who work in the space. Some working for HFT firms, some elsewhere. Also reading on the topic over the years.
There does seem to at least be some evidence that HFT firms decrease retail spreads overall. Either way, my main point being made is that negative impact to retail traders is very much in question.
Market makers are simply an artifact due to how shares are traded based on limitations that existed before computers. The aren’t some inherent aspect of having a stock market.
The money isn’t coming from thin air. If N people trade a a finite set of shares back and forth every day the only way to extract money from that set of people is for them to lose money.
Yeah, the stock market may be positive sum over the long-term, but it's certainly zero sum over the millisecond-term. Whether it's "retail" or "institutional" that is paying for HFT profits, it's all retail in the end.
Isn’t Ken Griffin still considered very clever? Citadel is one of the most successful hedge funds of the is era and has largely accelerated since 2020.
Original headline is "Jane Street suffers $15bn loss in July market ructions".
HN guidelines do request use of original title and in this specific case the change of title is misleading by implying that situational awareness directly caused losses at JS.
In the text it says "the US trading firm was wrongfooted during last month’s market ructions including the meltdown at AI-focused hedge fund Situational Awareness" so while SA is mentioned the implications of a direct link to the losses is less strong.
Well, they did because JS owned a economics interest in SA, which led to the loss. So it was poor capital allocation, but really a systemic failure to delete leverage from the equation.
Always been a bit wary of Patrick. He reminds me of those people who in the 1990s/2000s would have become professional talking head guests on CNN. The older ex-academic/ex-industry guys who knew how to spin popular news stories into sound bites for the general public, while offering a veneer of authority. I'd rather get analysis from people who don't chase pop news stories for a living.
But he is very entertaining and has more than a veneer of authority. His early educational YouTube videos covering topics like derivatives pricing are genuinely very good.
> His early educational YouTube videos covering topics like derivatives pricing are genuinely very good.
Which is a common story these days. Nothing wrong with that, there are worse people who become the Youtube-content guy. I've just gone down that road enough times to know to eject early.
Is there anything he's said in particular that, given the benefit of hindsight, you feel has turned out to be misleading in retrospect?
Speaking for myself only, but if I were going to post a comment like yours on a public forum insinuating doubts about a specific person and vaguely implying their analysis is not trustworthy, I'd come armed with at least once example.
It’s good to be weary of any YouTuber. I don’t think he’s a sensationalist. it’s not like he’s saying “don’t listen to those other people, I’ll bring you the -real- info”. And he’s sighting journalists and experts and providing references. When he introduces a framing concept it’s usually from a published book. When other commentators were telling me that big tech was hiding their debts to make their balance sheet look better, he offered a more he offered the more neutral perspective that it’s normal to count purchase agreements that way. But that spreading disclosure of information across so many places so that only the careful notice, leads to partial revelations, where being right doesn’t matter. Which seems a more useful take away than just big tech is being fraudulent about the ai bubble.
This isn't the TV news era. If you're into learning science you're not limited to choosing between the Michio Kaku or Neil deGrasse Tyson types. Same with finance and economics or any other topic.
Read about their talent acquisition process and interview days. They certainly attract the most brilliant people, but it’s important guard rails are kept on them lest they repeat the same missteps their alumni have taken.
They're still up $25B for the year, so it's hard to feel bad for them :-)
On a more serious note, Jane Street has hired some very impressive technical talent. I'd work for them, myself, if I didn't have to relocate to Chicago.
I've applied to Jane Street dozens of times, interviewed twice, and have always been declined.
Obviously I'm not entitled to a job, so no hard feelings on that, but it's a little sad because I have always been a big functional programming nerd and it would be fun to work with Ocaml libraries. The fact that they pay really well is also appealing...
I regret not going through their application process 20 years ago, when I didn't know better. They did some kind of job fair thing and their starting salary was mindboggling, back when $600k/yr was "work there for 3 years and retire" kind of money.
"Jane Street has offices in some of the world’s most dynamic cities, including a presence in Amsterdam, Chicago, Hong Kong, London, New York and Singapore."
Right, and plenty of comments containing non-zero snark are fine. There's a line over which comments become unreasonable.
If mine was over that line, so are a good 30% of HN comments. Seeing as those comments exist, I think your comment flagging criteria are what need to be adjusted here.
Frankly I think you're just annoyed because the reaction to your comment was not "oh wow this guy could work for Jane Street if he wanted but he doesn't because he doesn't want to move cities. Wow so cool"
The language is clear and unambiguous, and is intended to set a floor for the caliber and quality of discussion here. If 30% of comments here are equally bad, that means it’s not enforced as well as it could be. It doesn’t mean we’re intentionally lowering the standards.
My intent when I made that statement was not how you interpreted it. Its people genuinely impress me. And besides, what if I could work for them? Wouldn’t you be happy for me? Why the sour grapes?
As the Guidelines also state (paraphrasing): use the most charitable interpretation of a fellow member’s contributions.
Well, you certainly didn't use the "most charitable interpretation" of my comment, now did you? Why not assume that I too am as competent as you see yourself and simply also don't want to move to Chicago where Jane Street definitely is? It's a weak person who hides behind rules they don't themselves follow.
Lots of companies manage to impress lots of incompetent, arrogant people. Your initial comment sounded like such a person and mothing you've said since has done anything to disabuse the reader of that. "The rules say you're not supposed to reply with sarcasm! Flagging your comment!" says the person that Jane Street would totally love to hire.
Like I said, you're just annoyed someone is criticizing your arrogance. If you weren't being arrogant, then my initial reply is utterly unobjectionable; it's only unkind or sarcastic in response to the arrogant interpretation of your initial comment, and is inert to the "best possible" interpretation by the rules you don't follow but want others to.
There is a significant difference between sarcasm meant to insult, and sarcasm meant to be playful humor with a point. Common uses of sarcasm include witty or playful language, humorous banter, the expression of frustration at unfortunate events, self-deprecation, and as a coping mechanism for difficult situations. I see that you couldn't tell the difference in that situation, but trust me, that person was not insulting you. They included themselves in the joke.
The language is clear and unambiguous, and is intended to set a floor for the caliber and quality of discussion here.
I take your point, but the humor, if it was that, was made clumsily and was not well received. It’s not just me who felt that way; it was downvoted and eventually killed.
“By our calculations, Jane Street ponied up a one-off $200mn to do the deal and then locked in a further $200mn of costs per annum, at least in part, to avoid us gawping at their numbers every quarter. Wowsers” [1].
> Jane Street has generated more than USD 40 000 000 000 in net trading revenues in the year to Friday, even accounting for the July loss, which exceeds its entire haul for 2025, according to one of the people familiar with the matter.
Sure. It’s still an embarrassing hit they’d want to keep secret, particularly if they’re still in those positions. Paying hundreds of millions to hide a $15bn MtM loss makes sense.
It's all so sketchy. Jane Street were investors in SA but presumably were much more sophisticated and savvy than Leopold. When SA got in trouble, 3 firms got into a bid war for the assets at fire sale prices: Citadel, Jane Street and a third I forgot. Citadel outbid the other 2, but it's all weird, like Jane Street wanted in on the popular boy's book that they knew was going to tank and just were waiting around in the water like sharks.
It’s sketchy to invest in a fund they probably knew full well had terrible risk practices and was likely going under on the first drawdown.
When Leopold went to pitch NY investors they all passed and thought he was full of it. He could only convince California tech guys. Savvy finance guys saw SA for what it was (leveraged beta trade). Jane street are finance guys, not California tech bros.
One theory (I don’t necessarily believe it): Jane Street was after the private part of SA’s portfolio (Anthropic), which is difficult to come by. Losing a few million dollars investing and getting in that network was worth it for them to try to groom Leopold to eventually sell them the private stake
It's a business that transfers wealth, at great speed, many many times per second, 24/7. HN users have a massive hard-on for them because their engineers are so skilled, but the broader social utility of their business is basically nil.
AFAIK they’re like a hedge fund with quants that trades its own money. In fact, most people (everyone?) who works there is a quant. It’s the only way they trade. They are extremely profitable. Of course you can Google this and get a more accurate picture. I know them as the most famous OCaml shop.
Personally I have mixed feelings about what they do. The engineer in me used to root for them. The way they operate as a pure tech shop was very refreshing in the hedge fund/traditional finance world (crypto world is the opposite). But the trader in me now abhors how they make their money, that is arguably at the expense of retail traders.
What's the grumpy version of xkcd 1053? Anyway, Jane Street does high frequency trading on Wall Street, and they're kind of a big deal in that sector. They date back to 1999, with some IBM people. Other than the money, the reason they're interesting for HN is they're an OCaml shop and do a lot for that ecosystem. So if you're a computer language nerd and want to work in a functional programming language, but one that has real world applications, and make a lot of money doing it, Jane Street is the place to be!
> Jane Street has generated more than $40bn in net trading revenues in the year to Friday, even accounting for the July loss, which exceeds its entire haul for 2025, according to one of the people familiar with the matter.
This would make JS one of the most profitable trading firms of all time even with the loss.
Basically profit from trading before they pay for salaries and office rent and all that jazz.
It's easy to make paper billions with synthetic shares and infinite deadline extensions for settlement. I'm old and still remember when Ken Griffin was lauded a clever person before he got caught with his hands in the GME mayo jar..
HFT doesn't cost retail investors anything.
i.e. retail investor → brokerage platform → clearing/execution infrastructure → Jane Street → payment back toward the brokerage side of the chain.
Who captures the economic value created by retail order flow?
Jane Street.
In an ideal market, this product line shouldn't exist. Institutional investors should not be making money on the activity of retail investors.
What incentives determine where that flow is sent, and would investors receive better execution if their orders were exposed to genuinely competitive price formation rather than privately internalised by a concentrated group of wholesalers?
The regulators should be squashing any HFT related or retail order flow, but it's so opaque _by design_ that getting policymakers, or the general public, to understand that retail investors are paying some portion of tax on their $20T USD annual trades to these companies.
Granted, these order flows _sometimes_ work the other way -- and retail users get a better deal on a trade.. But would you really expect the market to be worth what it is, if that was the case less more often than not?
There is a clear and obvious conflict: the broker is supposed to seek the best execution for the customer while potentially being paid by the firm receiving that customer’s order. How can that be, when the broker's in bed with the liquidity providers?
It likely lowers the transaction costs due to adding liquidity and narrowing bid/ask spreads for small retail orders.
But indirectly it likely raises costs for institutional investors like pension funds and large ETF managers making giant block trades on behalf their beneficiaries.
So tldr; Probably fractionally better pricing for your $5k GOOG trade, fractionally worse for your VOO holdings over the long term.
There does seem to at least be some evidence that HFT firms decrease retail spreads overall. Either way, my main point being made is that negative impact to retail traders is very much in question.
https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2183806
The money isn’t coming from thin air. If N people trade a a finite set of shares back and forth every day the only way to extract money from that set of people is for them to lose money.
HN guidelines do request use of original title and in this specific case the change of title is misleading by implying that situational awareness directly caused losses at JS.
In the text it says "the US trading firm was wrongfooted during last month’s market ructions including the meltdown at AI-focused hedge fund Situational Awareness" so while SA is mentioned the implications of a direct link to the losses is less strong.
edit: more detail in https://www.reuters.com/business/finance/jane-street-took-15... confirms some losses linked directly to SA and some losses to their own positions.
Correlation is not causation.
Pretty short so I imagine more details and analysis are forthcoming.
But he is very entertaining and has more than a veneer of authority. His early educational YouTube videos covering topics like derivatives pricing are genuinely very good.
Which is a common story these days. Nothing wrong with that, there are worse people who become the Youtube-content guy. I've just gone down that road enough times to know to eject early.
Speaking for myself only, but if I were going to post a comment like yours on a public forum insinuating doubts about a specific person and vaguely implying their analysis is not trustworthy, I'd come armed with at least once example.
So you can blame him for that style lately, but its not all he can do.
On a more serious note, Jane Street has hired some very impressive technical talent. I'd work for them, myself, if I didn't have to relocate to Chicago.
They have $140B AUM.
So they are up ~18%.
https://observer.com/2024/11/jane-street-quantitative-tradin...
Obviously I'm not entitled to a job, so no hard feelings on that, but it's a little sad because I have always been a big functional programming nerd and it would be fun to work with Ocaml libraries. The fact that they pay really well is also appealing...
No, even better: they're still up $40B for the year.
https://www.janestreet.com/culture/our-offices/
"Jane Street has offices in some of the world’s most dynamic cities, including a presence in Amsterdam, Chicago, Hong Kong, London, New York and Singapore."
https://www.janestreet.com/culture/benefits/?office=nyc&view... (scroll down)
I don't see anything in my comment that is more against HN guidelines, nor more uncalled for, than the humblebrag in the original comment.
If mine was over that line, so are a good 30% of HN comments. Seeing as those comments exist, I think your comment flagging criteria are what need to be adjusted here.
Frankly I think you're just annoyed because the reaction to your comment was not "oh wow this guy could work for Jane Street if he wanted but he doesn't because he doesn't want to move cities. Wow so cool"
My intent when I made that statement was not how you interpreted it. Its people genuinely impress me. And besides, what if I could work for them? Wouldn’t you be happy for me? Why the sour grapes?
As the Guidelines also state (paraphrasing): use the most charitable interpretation of a fellow member’s contributions.
Lots of companies manage to impress lots of incompetent, arrogant people. Your initial comment sounded like such a person and mothing you've said since has done anything to disabuse the reader of that. "The rules say you're not supposed to reply with sarcasm! Flagging your comment!" says the person that Jane Street would totally love to hire.
Like I said, you're just annoyed someone is criticizing your arrogance. If you weren't being arrogant, then my initial reply is utterly unobjectionable; it's only unkind or sarcastic in response to the arrogant interpretation of your initial comment, and is inert to the "best possible" interpretation by the rules you don't follow but want others to.
Way to double down there on being a dick, dude.
I take your point, but the humor, if it was that, was made clumsily and was not well received. It’s not just me who felt that way; it was downvoted and eventually killed.
[1] https://www.ft.com/content/28a51284-98cc-4767-a306-0540d2656...
When Leopold went to pitch NY investors they all passed and thought he was full of it. He could only convince California tech guys. Savvy finance guys saw SA for what it was (leveraged beta trade). Jane street are finance guys, not California tech bros.
This is completely illogical. If they knew it was going to tank, they wouldn’t invest.
As conspiracy theories go, this one doesn’t even have a leg to stand on.
Personally I have mixed feelings about what they do. The engineer in me used to root for them. The way they operate as a pure tech shop was very refreshing in the hedge fund/traditional finance world (crypto world is the opposite). But the trader in me now abhors how they make their money, that is arguably at the expense of retail traders.
...
I'll see myself out.