Over two years after publication of a proposed regulation, a final regulation implementing the so-called “Volcker Rule” is expected to be adopted tomorrow by the five US Federal financial regulatory agencies. Two of them — the Federal Reserve and the Commodity Futures Trading Commission—are expected to adopt the regulation at public meetings. According to reports, the explanation and regulatory language may be over a thousand pages long.

Assuming that the agencies go forward as announced, the most important points to look for in a final regulation are:

- The definition of market-making. The Volcker Rule prohibits the conduct of proprietary trading for the account of a bank but allows market-making to satisfy customer demand. What will the final regulation require banks to do in order to show that market-making is not disguised proprietary trading? What impact on market liquidity and prices will the final decision have, and do the agencies indicate any concern about this?

Please see full memo below for more information.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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