As Wall Street's major trading departments watch rival Jane Street keep breaking records, one question is constantly raised: are they breaking the rules of the game, or are they playing another game? The trading company's huge losses in July gave the answer. Jane Street has long positioned itself primarily as a market maker and liquidity provider, but its $15 billion loss last month is comparable to the most notorious loss in hedge fund history, and even harder to imagine for a modern bank's trading department. This failure in July was Jane Street's first monthly loss in ten years, but it didn't shake the company's roots, or even prevent it from setting a new annual performance record this year. But it does reveal that the directional risks it bears far exceed the scope of traditional Wall Street intermediaries. It also shows that among the emerging forces in the financial world, the boundaries between market makers, proprietary traders, and hedge funds are becoming increasingly blurred. Even Jane Street herself is beginning to acknowledge this. According to people familiar with the matter, in a recent bond offering, the company described that its strategy was evolving to include long-term bets, which is similar to the practice of hedge funds. A Jane Street spokesperson declined to comment.

As Wall Street's major trading departments watch rival Jane Street keep breaking records, one question is constantly raised: are they breaking the rules of the game, or are they playing another game? The trading company's huge losses in July gave the answer. Jane Street has long positioned itself primarily as a market maker and liquidity provider, but its $15 billion loss last month is comparable to the most notorious loss in hedge fund history, and even harder to imagine for a modern bank's trading department. This failure in July was Jane Street's first monthly loss in ten years, but it didn't shake the company's roots, or even prevent it from setting a new annual performance record this year. But it does reveal that the directional risks it bears far exceed the scope of traditional Wall Street intermediaries. It also shows that among the emerging forces in the financial world, the boundaries between market makers, proprietary traders, and hedge funds are becoming increasingly blurred. Even Jane Street herself is beginning to acknowledge this. According to people familiar with the matter, in a recent bond offering, the company described that its strategy was evolving to include long-term bets, which is similar to the practice of hedge funds. A Jane Street spokesperson declined to comment.