For the most part, the industry's responses to the proposed rule have been unenthusiastic, ranging from skepticism to outright frustration and apprehension. And while we examine some of the more common areas of concern in this paper, the prevailing sentiment is that it will prove extremely difficult under this new regime to distinguish banned proprietary trading from its bona fide counterpart, the buying and selling of securities on behalf of clients. The majority of industry participants contend that market liquidity in the United States (U.S.) will be negatively impacted, transaction costs will rise, trading volumes will be driven to other jurisdictions and the U.S. economy will suffer as a result of the Volcker Rule.
The stakes are high, the timelines are short and the range of comments and opinions submitted by industry participants and observers are both vast and complex. Regulators have been inundated with submissions encouraging them to loosen, tighten, modify and/or scrap the proposed rule altogether. In the following pages, KPMG provides a synopsis of some of the key issues and themes that have emerged following a detailed examination of the formal responses from a wide range of investment banks, industry associations and other influential players. We provide this report in hope it helps clients better understand scope of this regulation, its potential impact on their business and what measures may need to be contemplated in order to comply.