FINANCIAL TIMES: Financial regulators moved towards tough prescriptions on banks’ trading activity on Tuesday, which could push more activity out of Wall Street, swell back office costs and force chief executives to swear personally that their compliance systems are adequate.
Morgan Stanley is the latest of several banks to announce a spin-off of proprietary trading divisions in advance of new rules that stem from the Dodd-Frank financial reforms that were passed last year and include the “Volcker rule” that bans banks’ trading for their own account. Paul Volcker, the former Federal Reserve chairman, urged a strict ban.
The industry had been anticipating loopholes in the final rules because the difficulty of separating allowed market making, where groups buy and sell on behalf of clients, and prop trading, where they trade for themselves, as well as a perceived lack of appetite for a tough rule from the Treasury and the Fed… (more)
