Entering text into the input field will update the search result below

Volcker Rule: It's The New Glass-Steagall

Mar. 10, 2015 10:32 AM ETDIA, SPY, QQQ, IWM4 Comments
Celan Bryant profile picture
Celan Bryant


  • The Volcker Rule is the legal separation between consumer banks and proprietary trading.
  • Much like Glass-Steagall, which was repealed in 1999, the Volcker Rule draws a new line in banking but it's more exhaustive in some ways.
  • Ultimately, the goal of the new rule is to improve resiliency without sacrificing global competition or liquidity.

In 1999, President Bill Clinton repealed Glass-Steagall as a concession to big banks. The argument was that the rule had become extinct and largely unnecessary. Ten years later the media blamed the Great Recession on a host of financial deregulation policies including the repeal of Glass-Steagall.

On February 9, 2015 SEC Commissioner Kara M. Stein was in Tokyo, Japan to attend the International Organization of Securities Commission (IOSCO) Board Meeting in Seoul. While there she gave a speech about the changes in the U.S. financial system brought on by the Volcker Rule.

The Volcker Rule is the legal separation between consumer banks and proprietary trading. The rule is more exhaustive than Glass-Steagall, covering things like swaps, securitized entities and offshore accounts. The Volcker Rule, also described as "Prohibition and Restrictions on Proprietary Trading and Certain Relationships with Hedge Funds and Private Equity Funds", was originally proposed by Paul Volcker, former Federal Reserve Chairman, and was later brought to life in the Dodd-Frank Wall Street Reform and Consumer Protection Act. It applies to U.S. banks anywhere in the world and it has teeth because it's enforced by the SEC; banks have until July 21, 2015 to be in compliance.

"Banking traditionally has been an honorable profession," Stein tells the audience,

and bank professionals should be able to take pride in helping to provide capital to growing businesses or successfully managing investors' money. Frankly, I believe there is a genuine desire among most bankers to regain the public's trust and respect. But to do that, bank CEOs and Boards of Directors need to continue to rethink and re-envision their mission, as well as the incentives of their firms that encourage excessive risk-taking.

And this is the main communication and observance on the Volcker Rule by advocates. It is not meant to be a

This article was written by

Celan Bryant profile picture
We are a group of traders (non-coders) on the hunt for the “holy grail of automated trade strategy”. We define that strategy as having a profit factor greater than 3, annual draw-down less than 3%, annual return (return on max drawdown) greater than 500%, minimum daily net profit of -$1,000, avg daily profit greater than $1,000, and less than 5,000 trades annually. Visit us at Automated Trading Strategies on Substack.

Analyst’s Disclosure: The author has no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. The author wrote this article themselves, and it expresses their own opinions. The author is not receiving compensation for it (other than from Seeking Alpha). The author has no business relationship with any company whose stock is mentioned in this article.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

Recommended For You

To ensure this doesn’t happen in the future, please enable Javascript and cookies in your browser.
Is this happening to you frequently? Please report it on our feedback forum.
If you have an ad-blocker enabled you may be blocked from proceeding. Please disable your ad-blocker and refresh.