This morning, 3 of the five regulatory agencies will be voting on the proposed Volcker Rule, and Wall Street doesn’t like it. The Volcker Rule was created as part of the new Dodd Frank reforms and it disallows certain types of risk taking, such as proprietary trading, hedging and sponsoring hedge funds. Brokerage firms said this will reduce profits and staff, but this is used as a threat to the regulators. Granite Group’s perspective: the firms will circumvent these rules and find a way to make money regardless.
There are ways to circumvent some of the regulations, as The Volcker rule does not apply to Foreign entities. Whether they choose that alternative or not, we do not see any real change happening to the nature of the investment firms nor the profits of the companies affected.