Dealers struggle to develop metrics to spot prop trading

Paul Volcker
Paul Volcker: still a fierce advocate of the rule

Banks are considering a variety of quantitative metrics to meet the requirements of the Volcker rule – part of the Dodd-Frank Act – but none is ideal, say dealers.

The rule – named after former chair of the Federal Reserve Paul Volcker – bans proprietary trading and limits bank investment in hedge funds and private equity firms. Underwriting, market-making and hedging are allowed – but all involve the bank taking proprietary positions, raising fears that a strict interpretation of the rule would

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