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By Saqib Iqbal Ahmed NEW YORK, Oct 1 (Reuters) – The recent stock market rally has left some systematic trading strategies so heavily exposed to equities that even a modest market pullback could force them to dump billions of dollars of shares, amplifying any potential selloff. Volatility control funds – systematic investment strategies that typically buy equities when markets are calm and sell when they grow turbulent – bought up stocks as the S&P 500 rose 12% for the year. As stocks have rallied on robust earnings performance, propelled by spending to build out AI infrastructure, volatility has petered out, meaning these strategies needed to ramp up risk-taking. The buying has continued in recent weeks, pushing these strategies’ equity allocations to the 98th percentile — meaning they’ve been higher only about 2% of the time since 2010, according to Deutsche Bank data. Not only do these strategies now have limited capacity to add further to their equity holdings — drying up a reliable source of buying support for the market — but they are also increasingly vulnerable to any market shock. “Volatility control exposure is historically stretched,” said Stefano Pascale, head of US equity derivatives research at Barclays. “In particular, even a mild rise in volatility would theoretically cause a significant exposure unwind, which could potentially further exacerbate volatility in the market,” Pascale said. That could exacerbate any selloff and illustrates the fragility of markets right now. The narrowly-led, tech-driven rally has left investors crowded into the same stocks, so a small shock could snowball. With 1-month and 3-month S&P 500 realized volatility — how much stocks are actually swinging — hitting multi-month lows earlier this month, it would not take much to jolt market gyrations higher from these depressed levels, analysts said. “Further volatility compression would support incremental re-levering, while a volatility spike could trigger sharper de-leveraging,” JPMorgan global equity derivatives strategists said in a note on Monday. ASYMMETRIC RISK Vol control strategies are run by a variety of firms, including insurance and annuity issuers as well as asset managers. Since these funds generally don’t publicly disclose exact strategy-level AUM, there’s no single authoritative figure, but estimates from various banks peg their assets at $300 billion to $500 billion. While the potential scale of selling is relatively small compared with the $66 trillion value of the S&P 500 alone, selling by such funds often tends to exacerbate volatility well beyond what their size would suggest, analysts said. “Their first-order effect is rather limited … the tail won’t wag the dog,” said Nathan Shetty, chief investment officer at SEI, a financial technology and investment management firm. SEI runs the Global Managed Volatility Fund, which aims to reduce risk by picking steadier stocks, not by cutting equity exposure when volatility rises. “(But) watching their behavior is and can be a signal in and of itself … there’s a reflexivity to it that could lead to other managers, professional investors and otherwise changing their positions,” Shetty said. Vol control strategies react differently to shifts in volatility, but Pascale uses a typical 10%-vol-target fund to illustrate the reaction function: with an equity allocation currently around 88%, a further drop in volatility that pushed that allocation to 99% could require an additional $25 billion in buying. Conversely, applying that same reaction-function model to a mildly bearish scenario, the typical fund’s equity allocation could fall to below 40% — a shift that would entail selling more than $100 billion in equities. “That’s a lot of asymmetry,” Pascale said. Equity allocations for another volatility-sensitive systematic strategy, Commodity Trading Advisors (CTAs) — trend-following funds that scale exposure up or down based on price momentum and volatility — also sit at a historically high 82nd percentile, according to Deutsche Bank. Like with vol control funds, these too present limited scope to add equity exposure, having already priced in much of the recent momentum. The potential gains for equities are dwarfed by potential losses should markets falter. A UBS estimate from late August — the most recent analysis available — suggests a two-sigma move, a rare price swing that happens only about 5% of the time, could trigger five times as much selling on the downside as buying on the upside. With US midterm elections in five weeks, the precarious positioning in these systematic strategies is a risk “that appears increasingly relevant,” Barclays analysts said in a note. (Reporting by Saqib Iqbal Ahmed; editing by Megan Davies and Nick Zieminski) Brought to you by www.srnnews.com

By Alexandra Alper WASHINGTON, Oct 1 (Reuters) – A Democratic lawmaker is warning that Beijing could steal AI model weights developed by OpenAI, Anthropic and other top US firms, erasing the US edge over China in the AI race and posing a risk to US national security. OpenAI and Anthropic have reported multiple instances of Chinese AI firms like Moonshot or DeepSeek “distilling” their AI models, or training their own tools from the output of leading Western models. But there are few known cases of any bad actor stealing model weights, the exact parameters and code that make an AI model operate. Congressman Ro Khanna, who represents Silicon Valley and serves as ranking member on the House China Select Committee, asked top US AI firms to provide data on all known efforts by China or other hostile actors to illegally access their prized model weights. He also requested information on cybersecurity measures in place at the AI firms to combat such theft. “The theft of an advanced model weight by a hostile non-state actor could endanger all of humanity, and the theft of such a model weight by (China) could erode America’s AI lead with the stroke of a keyboard,” he wrote in letters to the CEOs of OpenAI, Anthropic, Google , Meta , and SpaceXAI seen by Reuters and not previously reported. “Never before have the national security and economic prospects of a nation been so dependent on the cybersecurity of a small handful of companies,” he added in the letters, dated Wednesday.  The Chinese Embassy in Washington and the companies did not immediately respond to requests for comment.  The letters illustrate deepening concern about the national security risks posed by AI and add to mounting pressure on American AI giants – and the Trump administration – to rein in the technology. OpenAI and Anthropic have reported that their AI agents hacked into external secure systems, while Meta and Google say they have found similar behavior by their agents. Such breaches have prompted some researchers to warn that the technology could go rogue and kill humans within a decade. The warnings have fueled calls for action from both Democratic and Republican lawmakers. But President Donald Trump has repeatedly downplayed such concerns, stressing the importance of maintaining America’s competitive edge over China and pointing to the Justice Department as a pre-existing guardrail for AI.  Trump on Tuesday said ​tech executives had agreed to establish voluntary standards for AI. In an interview about the letters, Khanna said: “I know these guys. You cannot trust Silicon Valley tech billionaires to write the rules to keep us safe.”  (Reporting by Alexandra Alper; Editing by Stephen Coates) Brought to you by www.srnnews.com

By Mireia Merino MADRID, Oct 1 (Reuters) – Spain’s King Felipe will visit the disputed North African enclaves of Ceuta and Melilla this month, sources in the royal household said on Thursday, a move that could further strain tense relations between Madrid and Rabat following a border crisis this summer.  The trip by Felipe and Queen Letizia on October 13 and 14 will be his first to the enclaves during his 12-year reign. It comes just over two months after more than 72,000 migrants surged into Ceuta from Morocco in late July.   The Moroccan government has historically opposed Spanish royal visits to the two cities, over which it claims sovereignty and which it regards as occupied by Spain. Madrid considers the strategic outposts an integral part of its territory. Ceuta and Melilla have been part of Spain since the 17th and 15th centuries, respectively. Felipe, Spain’s ceremonial head of state, has mostly refrained from commenting publicly on the Ceuta crisis since it began, first mentioning the enclave two weeks ago to praise civil protection workers there. But at an official dinner for French President Emmanuel Macron on Tuesday during his state visit to Spain, Felipe said European countries should have shown more solidarity with Madrid, calling the situation in Ceuta “unacceptable.”. Morocco’s Foreign Ministry did not immediately respond to a Reuters request for comment on the planned visit. Political debate in Spain since the border surge has largely centred around Morocco’s precise role in the crisis. Opposition parties have accused Moroccan officials of complicity or inaction and accused Prime Minister Pedro Sanchez of being too soft on Rabat.  After initially praising Morocco for its cooperation in repatriating the migrants and repeatedly denying that Rabat had orchestrated the crisis, Sanchez told CNN in an interview last week that Morocco’s border controls had failed during the rush. Morocco has denied any laxness, blaming the crossing on social media disinformation, human traffickers, and the misinterpretation of a Spanish court ruling that appeared to open a legal loophole for arrivals by sea. (Reporting by Mireia Merino; Additional reporting by Ahmed El Jechtimi; Editing by David Latona and Gareth Jones) Brought to you by www.srnnews.com

By Bo Erickson WASHINGTON, Oct 1 (Reuters) – President Donald Trump travels to Texas and Oklahoma on Thursday to begin a 32-day campaign blitz aimed at bolstering Republican candidates as his party fights to hold onto its slim congressional majorities in November’s midterm elections. Trump wants to be the face of the party’s midterm campaign at a moment when some Republican candidates are unsure whether the president will help or hurt them. While a number of Republicans in competitive US House of Representatives and US Senate races have welcomed Trump’s decision to hit the campaign trail, others have become increasingly willing to break with him on issues that are riling voters, including the war with Iran and the spread of electricity-guzzling data centers. Trump told supporters at a White House event on Wednesday that he had done a bad job so far in selling his economic record since returning to the White House in January 2025. Voter discontent over his handling of the economy has fueled a shift in the electoral map, with some safe Republican seats now viewed as competitive in November by political analysts. Texas is among eight US Senate races rated competitive. Republican Senate candidate Ken Paxton, the state’s attorney general, is expected to appear with Trump at a stop north of Dallas, Paxton’s campaign said. Political observers will be watching for any awkward interactions between the two men following the leaking of a recording of Paxton telling a group of donors that Trump’s midterm convention in September hurt him and other Republican candidates. The Paxton campaign dismissed the recording as “manipulated nonsense.” Trump on Wednesday told reporters he had not heard about the recording. “I can tell you that the convention was amazing,” he said in the Oval Office. Trump backed the scandal-plagued Paxton over incumbent US Senator John Cornyn in the Republican primary, forcing the party to spend heavily to defend a traditionally safe Republican seat from Democratic challenger James Talarico. The president is expected to tout his tariff and trade agenda in Denton during a visit to Peterbilt Motors, where the White House says Trump-era truck tariffs helped spur job growth. The administration said Trump’s truck tariffs had enabled companies like PACCAR, owner of Peterbilt, to add more than 2,000 jobs nationwide, including some 1,000 at the Texas plant. But the costs to power these diesel and gas trucks recently reached record levels in Texas, stemming from the economic fallout of the Iran war. Diesel in Texas hit a record high of $5.97 per gallon two weeks ago and average gas costs are up almost 44% at $3.92 per gallon compared to this time last year, according to travel analyst AAA. After his Texas stop, the president will rally in Durant in southern Oklahoma, a state he won with more than 66% of the vote in the 2024 presidential election. The Republican National Committee, which is organizing the rally, said the location near the Texas border was chosen in part to attract supporters from neighboring Texas, where Paxton and Talarico are fighting for the US Senate seat. On Friday, Trump will continue his campaign rallies in Alabama, a similarly reliable conservative state in the South that also does not feature marquee competitive races. (Reporting by Bo Erickson; Editing by Ross Colvin and Alistair Bell) Brought to you by www.srnnews.com

By Dawn Kopecki NEW YORK, Oct 1 (Reuters) – A super PAC backed by billionaire Ken Griffin has spent nearly $5 million on Florida’s US Senate race to bolster Republican candidate Ashley Moody, a sign that major donors and party leaders are scrambling to defend seats once considered safe as President Donald Trump’s popularity wanes. Across the US, Republicans running for the Senate and House are facing voter backlash, according to party officials and strategists, as Trump’s approval rating slides and Democrats gain ground in races once viewed as long shots in November’s midterm congressional elections.  Party leaders increasingly worry they could lose control of the Senate, prompting donors and outside groups to devote resources to contests that until recently attracted little attention. The spending in Florida is one of the clearest signs of that shift.  The race between Moody, who was appointed to the seat in January 2025 after Marco Rubio became secretary of state, and Democrat Angie Nixon is still rated “Safe Republican” or “Solid Republican” by major election forecasters. Yet a Griffin-backed super PAC has spent $4.9 million attacking Nixon over the past two weeks, accounting for roughly 87% of all spending in the race. Party leaders and mega donors have started to pump money into races like Moody’s as internal data shows some candidates in states and districts Trump won by 10 or more percentage points in 2024 may still be vulnerable, according to people familiar with the party’s thinking.  Republican leaders expect to lose at least two Senate seats and increasingly fear losing control of the 100-member chamber, two people close to party officials said. Rank-and-file Republican senators at lunch last week were hopeful the 7 Senate and 22 House toss-up races identified by the Cook Political Report lean in their favor, according to one attendee.  Senator Tim Scott of South Carolina, who chairs the National Republican Senatorial Committee, told reporters on a call on Wednesday there was a “record” number of toss-up races within “striking distance” for Republicans. Election forecaster Nate Silver puts the odds of Democrats taking control of the House at over 92.3% and the Senate at 72.6%. Super PAC Stronger Safer Nation, which was backed by a $2.5 million donation in May from Citadel founder Ken Griffin and $6.7 million from a Florida state PAC when it closed in March, has raised about $12 million so far and has not spent money on any other race, Federal Election Commission filings show. Aaron Whitehad, a strategist for the independent super PAC, said it was formed in 2025 for the sole purpose of supporting Moody, so “it should not come as a surprise” that it is spending money on her campaign.  Party leaders have also come in with some late support for Moody. The Senate Leadership Fund, a super PAC aligned with Senate Majority Leader John Thune, dropped $30,000 in text messages for Moody about a week ago. Super PACs can spend unlimited sums on political campaigns. “Billionaires dropping money on unelected Ashley Moody is nothing new, but maybe it’s happening more frantically right now because they’re clearly terrified of our people-powered movement,” Nixon’s campaign manager Eunic Epstein-Ortiz said in a statement to Reuters.  Moody’s campaign and Griffin’s office did not respond to requests for comment. Griffin announced plans on Wednesday to donate $3 billion to Carnegie Mellon University to support the Pittsburgh school — including to build a campus in Miami, where he has moved his fund. A hedge-fund manager and prolific Republican mega donor, Griffin has kept a relatively low profile this election cycle, donating just $32.3 million to federal races so far, less than half of the $74 million he donated during the 2022 midterms and a fraction of the $108.8 million he spent during the 2024 presidential election cycle.  (Reporting by Dawn Kopecki. Additional reporting by Nolan D. McKaskill in Washington; Editing by Michael Learmonth and Howard Goller) Brought to you by www.srnnews.com