Volcker Rule - White Papers

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Dodd-Frank Timeline, The Volcker Rule
Proposal Date Comment Deadline Final Rule Released
October 12, 2011 February 13, 2012 December 10, 2013
Dodd-Frank Timeline, "Volcker Rule," CFTC
Proposal Date Comment Deadline Final Rule Released
February 14, 2012 April 16, 2012 December 10, 2013

White papers, research papers, government studies, and other submissions concerning the Volcker Rule.

Market Making Under the Proposed Volcker Rule - Darrell Duffie - January 16, 2012[edit]

January 2012

The research by Dr. Duffie centers on two unintended consequences of the as-proposed Volcker Rule:

  • Higher market execution costs and delays, more volatility in the face of supply and demand shocks, a loss of price discovery, and higher costs of financiang for homeowners; and
  • Migration of market making to the outside of the regulated bank sector, which could affect financial stability.

The paper elaborates upon the above points, and suggests an alternative approach, which would use capital and liquidity requirements to buffer the risks of market making.

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Implications for the US corporate bond market - Oliver Wyman/SIFMA - December 2011[edit]

December 2011

The study estimates the impact of the proposed Volcker Rule on liquidity, asset valuation, borrowing costs and transaction costs. Among the findings:

  • A one-time cost borne by investors would be a mark-to-market valuation loss between $90 billion $315 billion.
  • A recurring cost to issuers would be higher yields on new debt raised to "compensate investors for holding less liquid assets." The Oliver Wyman/SIFMA estimate expects between $2 billion and $6 billion in the first year, and between $12 billion and $43 billion "at a steady state."
  • Investors may also bear an "illiquidity cost" of between $1 billion and 4 billion.

The 37-page paper explains in detail its methodology and assumptions behind its estimates.

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Volcker Rule - White Paper - The Volcker Rule's Impact on Infrastructure - Deloitte - October 2011[edit]

October 2011

While much of the attention surrounding the Volcker Rule has been on dedicated proprietary operations, the scope of the Volcker Rule extends far beyond “distinct” proprietary trading desks and is likely to affect the core of how banking entities conduct their trading and securities operations going forward.

The Deloitte report outlines:

  • Initial response to the Volcker Rule
  • Permitted and proprietary trading activity
  • The gray area between activities
  • What the Financial Stability Oversight Council (FSOC) recommends
  • Timing of the Volcker Rule implementation
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Study & Recommendations Regarding Concentration Limits on Large Financial Companies - January 2011[edit]

January 2011

As required by the Dodd-Frank Act, the Financial Stability Oversight Council (FSOC) completed a study of the extent to which the concentration limit would affect: financial stability, moral hazard in the financial system, the efficiency and competitiveness of U.S. financial firms and financial markets, and the cost and availability of credit and other financial services to households and businesses in the United States. The study also contains the FSOC’s recommendations regarding modifications to the concentration limit to mitigate practical difficulties likely to arise in its administration and enforcement, without undermining its effectiveness in limiting excessive concentration among financial companies. These recommendations will be issued for public comment.

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J.P.Morgan Cazenove: Regulatory Arbitrage series: OW European over US IBs[edit]

Global Investment Banks, March 8, 2011

In response to the impending Dodd-Frank regulatory changes in the U.S, J.P. Morgan Cazenove Global Equity Research conducted a study on the likely impact of such regulatory reform on investment banks (IBs) and credit banks. In addition to such topics as executive compensation and the Basel III regulatory framework, it contains a section (pp. 33-40) on proprietary trading and the Volcker Rule.

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