Five federal agencies have jointly issued final rules to implement the Volcker Rule, which largely bars banks from proprietary trading.
The five agencies included the Federal Reserve, Commodity Futures Trading Commission (CFTC), Federal Deposit Insurance Corporation (FDIC), Office of the Comptroller of the Currency (OCC), and Securities and Exchange Commission (SEC). The law. Formally known as section 619 of the Dodd-Frank Wall Street Reform and Consumer Protection Act, the Volcker Rule
prohibits “insured depository institutions and companies affiliated with insured depository institutions from engaging in short-term proprietary trading of certain securities, derivatives, commodity futures and options on these instruments, for their own account. The final rules also impose limits on banking entities’ investments in, and other relationships with, hedge funds or private equity funds,” the agencies said in a joint statement.
However, there are certain exemptions for proprietary trading, including market making, underwriting, hedging, trading in government obligations, insurance company activities, and organizing and offering hedge funds or private equity funds. Under the final rules, trading solely as an agent, broker, or custodian is not prohibited, as it is not considered proprietary trading.
The scope of compliance requirements differs based on the size of the bank, as the final rules place less requirements on smaller institutions and gives them more time to comply. “Beginning June 30, 2014, banking entities with $50 billion or more in consolidated trading assets and liabilities will be required to report quantitative measurements. Banking entities with at least $25 billion, but less than $50 billion, in consolidated trading assets and liabilities will become subject to this requirement on April 30, 2016,” the SEC said in a statement.
The final rules go into effect April 1, 2014, but full compliance will not be mandated until July 21, 2015 for the largest banks. For those banks with at least $10 billion in consolidated trading assets and liabilities, but less than $25 billion, have the longest to comply, which is until Dec. 31, 2016.
Regulatory Agencies Finalize Volcker Rule
Five federal agencies have jointly issued final rules to implement the Volcker Rule, which largely bars banks from proprietary trading.
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