Volcker Rule

Just trying to get the consensus on what the Volcker rule will do to liquidity in these markets. Perhaps Mr. Bright or Maverick can give us some insight on how he sees this affecting the industry.

 

Will prop firms like Bright Trade, Echo and WTS still exist if the Volcker Rule goes into action this coming July 2012????

I just want leverage, low commissions and access to high volume/liquid stocks...maybe that is asking for too much after this thing possibly goes into action.

Is there a chance that this thing will not pass or is it a done deal?

 

if anything, it helps those type of prop firms. More opportunity to add liquidity.

 

It's still up in the air, but much like the impending transaction taxes that will really hurt retail traders, we think that, overall, it will be a benefit for our traders. Sure, we may lose some of those professional, high-speed adversaries, but as you stated, that should be good for our traders.

Don

 

The Dodd-Frank Act’s Volcker Rule would prohibit banking entities from engaging in proprietary trading of securities, derivatives and certain other financial instruments for the entity’s own account. The regulations have been jointly proposed by the SEC, Fed, DIC and ODC – but their growing complexity has created increasing confusion among analysts, politicians, and bankers alike.

 

Key word here is entities...
The entities targeted by the Volcker Rule are banks and brokers... If it removes them from speculating in the market, then it'll open a lot of opportunities for those that are left (e.g. prop firms and independent HFT shops)

 

I think it will hurt options liquidity a lot, because it's unclear how "like kind" risk will be handled. If a bank buys a 50 strike call, then can they sell a 52.5 call as a hedge?

I think it will do little to impact stock liquidity.

 

I'm simply asking if "retail" prop firms like Bright, Echo and WTS will still be able to provide leverage if this goes into action?

Does Bright get most of its leverage through Goldman Sachs? I know the trading transaction tax will hurt everyone if it happens. I want to know how this will impact the independent retail prop traders. Not those who get paid a salary and put up no money at a prop desk.

 

I doubt it'll affect leverage. The financial transaction tax was DOA in the states. the clearing rates will probably rise and so will the software & regulatory fees.

 

If anything getting leverage might be easier because banks will have more capital that would have been allocated to proprietary risk taking. It's got to go somewhere.