A long-sought final draft of the Volcker rule could emerge in December according to Commodity Futures Trading Commission (CFTC) chair Gary Gensler, concluding its long process of development.
Speaking at a Commission public meeting on Wednesday, Gensler said he hoped the six agencies involved in drawing the Volcker rule could agree and vote on a final draft, more than two years since it was first proposed under the Dodd-Frank Act.
“I am hopeful to try to schedule a public Commission meeting in the second week of December or third week of December,” he said.
The core aim of the rule is to limit banks’ proprietary trading function, which can expose end investors to risky bank activity and was seen as a key element of the 2008 financial crisis.
The main area of contention in developing the rule has revolved around differentiating banks’ key market making functions from proprietary trading. However, many major banks have already excised prop trading arms, bringing into question the value of the rule at this stage and causing buy-side firms to adjust trading strategies.
As these banks have adjusted, their institutional clients have had to adapt trading and investment strategies in line with this new environment, Laurie Berke, principal at consultancy TABB Group told theTRADEnews.com.
“Although the large broker-dealers have moved to reduce prop activity in line with the aims of Volcker rule, the buy-side’s adaptation is very much in progress and asset managers are being forced to re-evaluate how they trade and in which asset classes,” Berke said.