Prop trading restrictions already hurting liquidity, say investors

Restrictions on bank proprietary trading have caused liquidity to fall in both the cash and derivatives markets, forcing buy-side participants to adopt alternative investment strategies

Obama signs the Dodd-Frank Act in July. Investors say the restrictions on prop trading are harming liquidity

Credit investors say restrictions on bank proprietary trading, whether forced by regulators or resulting from internal business decisions, are causing liquidity to fall in the credit markets, making it more difficult to rebalance portfolios and deliver returns.

The controversial ‘Volcker rule’, intended to prevent US banks from making risky speculative investments that put customer deposits at risk, was announced as part of the Dodd-Frank Wall Street Reform and Consumer Protection Act, signed

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