According to Bloomberg,
Wall Street faces more intensive government scrutiny of trading after U.S. regulators issued what they billed as a strict Volcker rule today, imposing new curbs designed to prevent financial blowups while leaving many details to be worked out later.
The Federal Reserve, Federal Deposit Insurance Corp. and three other agencies formally adopted the proprietary trading ban. The rule has been contested by JPMorgan Chase & Co., Goldman Sachs Group Inc. and their industry allies for more than three years.
Wall Street’s lobbying efforts paid off in easing some provisions of the rule. Regulators granted a broader exemption for banks’ market-making desks, on the condition that traders aren’t paid in a way that rewards proprietary trading. The regulation also exempts some securities tied to foreign sovereign debt.
At the same time, regulators said the final version imposed stricter restrictions on hedging, providing banks less leeway for classifying bets as broad hedges for other risks. To pursue a hedge, banks would need to provide detailed and updated information for review by on-site bank supervisors.
“This provision of the Dodd-Frank Act has the important objective of limiting excessive risk-taking by depository institutions and their affiliates,” Fed Chairman Ben S. Bernanke said in a statement. “The ultimate effectiveness of the rule will depend importantly on supervisors, who will need to find the appropriate balance while providing feedback to the board on how the rule works in practice.”