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Volcker Rule to take centre stage in US

First Published 8th January 2015

Implementation of Dodd-Frank reforms aimed at curbing prop trading by commercial banks are expected to become one of the biggest US regulatory topics of the year.

Implementation of Dodd-Frank reforms aimed at curbing prop trading by commercial banks are expected to become one of the biggest US regulatory issues of the year.

The Volcker Rule prohibits banks from making certain kinds of speculative investments that are considered to have contributed to the 2008 financial crisis.

Ahead of the 21 July deadline, efforts to comply will dominate at major institutions, particularly with respect to proprietary trading provisions for which no time extension has been granted, reports the Financial Times.

Writing in TabbForum, George Bollenbacher, head of the Regulatory Reform Practice for Capital Markets Advisors, said that much of the discussion and concerns over Volcker relate to the market-making exemption.

"But the biggest changes may actually be in hedging. And the technology to support tagging of trades into specific exemptions and the monitoring for violations may be immature, if it exists at all. Without technology, trading under Volcker becomes a manual nightmare," he said.

Bollenbacher also outlined a list of recommended questions senior management should be asking compliance departments such as determining how many trading desks exist across all the instruments subject to the rule.

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