Volcker Rules: Banks Subjected to Trade Limits

Wayne Ellis

Federal Reserve Building

Volcker Rules: Banks Subjected to Trade Limits (Bloomberg)

After three years of court-wrangling and trade-offs, the Volker Rule will be finalized today by the Federal Reserve, the Federal Deposit Insurance Corp. (FDIC) and three other agencies to restrict risky proprietary trading, while protecting economically essential activities such as market-making. Thus, giant banks like JPMorgan Chase & Co. (JPM), Goldman Sachs (GS) and the others will be prohibited from making trades that could result in catastrophic losses that would require a government bail-out. However, in a major concession for staffers at the market-making desks of banks, the people who set prices couldn’t be found liable, going forward, for price fixing. As investors, you might be wise to see just how far afield some bank’s market makers will go you plunk down funds in the financial sector.

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