Possible Volcker Rule repeal and the future of trading?
What do you think will happen if most or all of Volcker Rule is repealed as hinted at by the Trump administration? There are already some prominent traders moving back to large banks after leaving hedge funds amidst rumors about Volcker rule either being re-written or repealed. If banks are allowed to bring prop trading back into full swing, would trading be a good industry to get into again? Or would it still be run by quants, programmers and algorithms albeit more of them? Would love to hear some thoughts on this, thanks.
It would make trading more logical. Bank guys always had a bit better balance sheet to sit on losses than just about any other trading desks. So bs quant moves are less likely.
Thanks for the reply, hopefully what you said happens. Anyone else?
bump
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Republican Landslide & the Volcker Rule (Originally Posted: 11/09/2016)
Seems like the Republicans are sweeping the executive and legislative branches this election. A republican controlled Congress and White House means that serious legislation and regulation overhauls are possible.
So does anyone think that Dodd Frank and the Volcker Rule will be repealed? Does this mean that some kind of prop trading at banks could possibly return? What does this mean for Wall Street careers going forward and capital requirements?
http://blogs.wsj.com/moneybeat/2016/11/09/dodd-frank-repeal-it-isnt-all…
I don't think this was a primary talking point throughout his campaign...
To my understanding, the following are issues he NEEDS to deliver on to satisfy his base for reelection (no particular order): 1. immigration 2. healthcare 3. trade agreements
not sure trump republicans give much thought to Dodd Frank and Volcker rule
Down With Dodd and Volcker (Originally Posted: 11/29/2016)
Jeb! Hensarling, the chairman of the House Financial Services Committee is working on a plan to take out key aspects of Dodd-Frank and Volcker Rule.
The name of the plan is The Financial CHOICE Act. (Creating Hope and Opportunities for Investors, Consumers and Entrepreneurs. Gotta love D.C. abbreviations.)
I have attached the executive summary below. (3 pages long)
The big banks under the Financial CHOICE Act would get the shackles taken off when it comes to betting with taxpayer deposits. There is also a provision to repeal Title II of Dodd-Frank ("Too Big to Fail") and implement a new chapter to the Bankruptcy code.
Looking at what Dodd-Frank and Volcker Rule have done since their inception, I only see more problems. Also with Met-Life winning their "TBTF" suit there is more tension on labeling of whether a company is a systematically important financial institutions
What do you guys think of this new plan? Do you like it? Hate it? If you were in congress, what would you do with financial regulation?
do you work here? 12 threads today
For some reason threads from the past disappeared so they're getting re uploaded by WSO.
Bump. Does anybody think prop trading will ever come back?
For the most part imo, the binding regulatory constraint post Volcker 2.0 (and assumption of compliance) isn't the Volcker rule anymore. Within reason, traders can take some prop risk, as long as its mixed into a market making operation (or is in a Volcker exempt product). The real problem are that compared with precrisis, capital requirements are much higher, so the minimum return threshold for prop trading (or even holding inventory as part of market making) to make sense from a roe perspective is much higher. As a result, corporate bond inventories are nowhere like they used to be, and during 2020, until SLR was temporarily waived, banks were limited in their capacity to expand their balance sheet when buying bonds was a license to print money. This is especially punitive for stuff like investment grade cash bonds, which is much more balance sheet intensive in a way that really punishes holding inventory, resulting in more inventory being held by nonbanks, while banks move risktaking to stuff with better regulatory treatment (derivatives, etfs, rates, mortgages, etc.) or stuff like high yield/distressed where the profits are high enough that you can get a decent ROE.
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