Volcker Rule Study Related to Proprietary Trading

SIFMA provides comments to the Financial Stability Oversight Council (FSOC) on the study regarding the implementation of the prohibitions on proprietary trading and certain relationships with hedge funds and private equity funds, Docket Number FSOC 2010-0002.

This comment letter relates solely to the portion of the Study related to the proprietary trading portion of the study. SIFMA is writing a separate letter on the hedge fund and private equity fund portion of the study.

SIFMA believes that the issues arising out of the proprietary trading portion of Section 619 are very different from those arising out of the funds portion. The proprietary trading provisions contain many vague definitions. These definitions require the agencies to exercise considerable discretion and judgment in implementation, and this discretion should be exercised in a manner that preserves the effective functioning of the markets and access to capital while achieving the objectives of the statute. As a result, SIFMA urges the FSOC to adopt a careful, staged approach to implementation of the proprietary trading restrictions with a firm grounding in market realities.

Our companion letter addresses the hedge fund and private equity fund portions of Section 619. In contrast to the proprietary trading provisions, the provisions relating to hedge funds and private equity funds do not generally suffer from excessive vagueness. Instead of lacking specificity, the key definitions in this portion of Section 619 are generally overbroad.