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?

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