Volcker rule could hurt liquidity in FX spot market, participants warn

Paul Volcker
Paul Volcker

The Volcker rule – a key component of the US Dodd-Frank Act designed to put an end to proprietary trading by banks – poses a threat to liquidity in the foreign exchange market and could lead to significantly increased transaction costs, according to market participants.

Originally conceived by former US Federal Reserve chairman Paul Volcker, the rule would prohibit banks from engaging in prop trading, as well as owning, sponsoring or investing in hedge funds or private equity funds. But

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