The Volker Rule and new opportunities in #proprietary #trading

The controversial Volcker Rule passed last year limits investment banks’ engagement in proprietary trading. This will of course negatively impact earnings at some firms that rely on prop trading as a source of revenue. But, for other market participants, the Volcker Rule may actually create opportunities. This theory is discussed in an interesting article I read today in Wall Street & Technology.

"The Volcker Rule, which states banks can’t have large proprietary trading shops, will certainly create an opportunity for start-up firms," asserts Marty Leamy, president of the Americas for Orc Software, a provider of technology and services for the global financial industry. "The new shops will want to start up quickly. Even though the Volcker Rule is far off, traders and the firms are already moving ahead of it."

For example, Morgan Stanley, Goldman Sachs and Bank of America have all scaled back proprietary trading in anticipation of the Volcker Rule’s rollout, leaving an opportunity for others to come and fill that space in the market.

Technology providers such as Orc, Simcorp and Omgeo, to name a few, stand to benefit as new firms are launched, helping the start-ups with their trading capabilities.

What are your thoughts on this? Does the Volcker Rule simply place unnecessary limitations on trading, or does it in fact serve a purpose and in some cases even create new opportunities? Let me know your thoughts!

Read the full article in Wall Street & Technology here.

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