Banking Entity Trading Under the Volcker Rule
24 June 2011
By Christopher Laursen
The Volcker Rule (section 619 of the Dodd-Frank Wall Street Reform and Consumer Protection Act), has the potential to significantly change the scope and scale of trading within federally insured depositories and their affiliates. In this NERA paper, Vice President Christopher Laursen describes the relevant background of the Volcker Rule trading restrictions and offers insight on potential implementation expectations. Given recent commentary by various government entities, it appears the Rule's proprietary trading restrictions will be interpreted and enforced in a relatively strict manner. Mr. Laursen notes that the regulatory interpretation of the Volcker Rule is likely to push banking entities with significant trading operations further in terms of the robustness of their trading and risk management systems and processes. The Rule is also likely to require heightened coordination between trading risk managers, compliance personnel, and regulators. The new requirements will present trading risk managers with ongoing challenges, but may also increase their status within organizations.
