US brokerage firm MF Global has filed for Chapter 11 bankruptcy protection after revealing £4bn of eurozone debt exposure.
The US brokerage, which has 2,000 staff worldwide including 600 in London, is said to be planning to sell its assets to rival Interactive Brokers Group.
Shares in MF Global were suspended by the New York authorities on Monday.
JPMorgan Chase and Deutsche Bank are the firm's two biggest creditors.
JPMorgan is said to have a claim of more than $1.2bn, while Deutsche Bank is owed more than $1bn.
Shares in JPMorgan fell 3.3% on the news of MF Global's Chapter 11 move, while Deutsche Bank's US-listed shares lost 8.7%.
Deutsche's shares in Europe were also hit, down 8.6%.
Chapter 11 postpones a US company's obligations to its creditors, giving it time to reorganise its debts or sell parts of the business.
Hedge fund spin-off
MF Global worried markets last week after disclosing a $191.6m (137m euros; £120m) quarterly loss.
This saw its shares fall by two-thirds, and its credit rating cut to junk.
Jon Corzine, who took over as chief executive of MF Global last year, made big bets on sovereign bonds issued by European countries, it is claimed.
The unsteady future of the eurozone meant investors downgraded the firm's prospects.
It was first reported at the weekend that Mr Corzine was seeking a buyer for the business.
MF Global's roots go back nearly 230 years to a sugar brokerage on the banks of the River Thames in London.
The firm was spun off from a hedge fund in 2007 and is one of the world's largest players in exchange-traded futures and options.