Volcker rule could hurt liquidity in FX spot market
Aug 30, 2012 at 09:10
1,569 Views
14 Replies
Aug 30, 2012 at 09:10
Hi people.. as most of you might already know, the Volcker rule would most probably take its full effect next year. I would like to have a light discussion on this.
Do you think this would affect the fx markets hard? If there's lower liquidity, transaction costs would run up as well..
Anyone in banks or prop trading firms that have plans or strategic changes due to the lower liquidity if this really kicks in? (Anyhow, lots of firms and institutions are petitioning that FX markets should be exempted)
Do you think this would affect the fx markets hard? If there's lower liquidity, transaction costs would run up as well..
Anyone in banks or prop trading firms that have plans or strategic changes due to the lower liquidity if this really kicks in? (Anyhow, lots of firms and institutions are petitioning that FX markets should be exempted)
"Our greatest weakness lies in giving up. The most certain way to succeed is always to try just one more time. -Thomas Edison"
Member Since Jan 14, 2010
556 posts
Aug 30, 2012 at 14:55
damienwah posted:
Hi people.. as most of you might already know, the Volcker rule would most probably take its full effect next year. I would like to have a light discussion on this.
Do you think this would affect the fx markets hard? If there's lower liquidity, transaction costs would run up as well..
Anyone in banks or prop trading firms that have plans or strategic changes due to the lower liquidity if this really kicks in? (Anyhow, lots of firms and institutions are petitioning that FX markets should be exempted)
Damien, I wasn't actually aware of such a rule. Tried reading on wikipedia, but the lingo is too technical for me 😳.
Can you please explain in short what does the rule mean for the forex industry?
Aug 30, 2012 at 15:18
Hi James .. the following is a webby where yiu can read up more on it.
https://www.risk.net/risk-magazine/news/2184938/volcker-rule-hurt-liquidity-spot-market-participants-warn
https://www.risk.net/risk-magazine/news/2184938/volcker-rule-hurt-liquidity-spot-market-participants-warn
"Our greatest weakness lies in giving up. The most certain way to succeed is always to try just one more time. -Thomas Edison"
Aug 31, 2012 at 03:48
Definition of 'Volcker Rule'
Trading restrictions placed on financial institutions. The Volcker rule separates investment banking, private equity and proprietary trading (hedge fund) sections of financial institutions from their consumer lending arms. Banks are not allowed to simultaneously enter into an advisory and creditor role with clients, such as with private equity firms. The Volcker rule aims to minimize conflicts of interest between banks and their clients through separating the various types of business practices financial institutions engage in.
Investopedia explains 'Volcker Rule'
Named after former Federal Reserve Chairman Paul Volcker, the Volcker rule basically stops banks from doing their normal business (installment loans, residential mortgages, equity credit loans, deposit services) as well as trading on their own behalf. The rule was introduced following the recession of 2008, to control the risk associated with the financial sector. Wall Street banks were accused of accumulating an excessive amount of risk and unfair business practices due to the inability of regulators to properly monitor their complex instruments and activities. The Volcker rule aims to protect individuals by creating a more transparent financial framework which can be regulated with greater ease.
Read more: https://www.investopedia.com/terms/v/volcker-rule.asp#ixzz255m9evxw
Read more: https://www.investopedia.com/terms/v/volcker-rule.asp#ixzz255m13umH
Trading restrictions placed on financial institutions. The Volcker rule separates investment banking, private equity and proprietary trading (hedge fund) sections of financial institutions from their consumer lending arms. Banks are not allowed to simultaneously enter into an advisory and creditor role with clients, such as with private equity firms. The Volcker rule aims to minimize conflicts of interest between banks and their clients through separating the various types of business practices financial institutions engage in.
Investopedia explains 'Volcker Rule'
Named after former Federal Reserve Chairman Paul Volcker, the Volcker rule basically stops banks from doing their normal business (installment loans, residential mortgages, equity credit loans, deposit services) as well as trading on their own behalf. The rule was introduced following the recession of 2008, to control the risk associated with the financial sector. Wall Street banks were accused of accumulating an excessive amount of risk and unfair business practices due to the inability of regulators to properly monitor their complex instruments and activities. The Volcker rule aims to protect individuals by creating a more transparent financial framework which can be regulated with greater ease.
Read more: https://www.investopedia.com/terms/v/volcker-rule.asp#ixzz255m9evxw
Read more: https://www.investopedia.com/terms/v/volcker-rule.asp#ixzz255m13umH
Aug 31, 2012 at 06:39
damienwah posted:
Hi James .. the following is a webby where yiu can read up more on it.
https://www.risk.net/risk-magazine/news/2184938/volcker-rule-hurt-liquidity-spot-market-participants-warn
thanks for the info.
Member Since Jul 03, 2012
186 posts
Aug 31, 2012 at 12:58
It will have a negative impact for US based financial firms and simply force them, their jobs as well as tax revenues to leave the country and set-up in business friendly countries outside the reach of US jurisdiction. Sarbanes-Oxley forced tens of thousands of companies to flee the US and the UK welcomed them which allowed the creation of the financial center of the world in London. The Volcker rule as well as Dodd-Frank will do more of the same and so does the idiotic tax system we unfortunately get raped by.
Pax puts the X in Forex.
Member Since Jan 14, 2010
556 posts
Sep 02, 2012 at 06:41
Reading through it, it looks like it's going to have a huge impact on the economy of US, which will affect forex trading as well.
I have to agree with TheLastBear - I think it's only a matter of time before firms will start moving their businesses overseas, just as you see with US forex firms. I think the rule will not hurt too much forex trading, just force it to happen elsewhere.
At this point, it looks like this rule is going to hurt their economy rather than to protect it.
I have to agree with TheLastBear - I think it's only a matter of time before firms will start moving their businesses overseas, just as you see with US forex firms. I think the rule will not hurt too much forex trading, just force it to happen elsewhere.
At this point, it looks like this rule is going to hurt their economy rather than to protect it.
Member Since Aug 22, 2012
11 posts
Sep 02, 2012 at 08:49
The United States is not the country it used to be. I left the USA 2.5 years ago and expatriated to the Philippines. Not only had the NFA messed things up for currency traders, but they had stripped our rights to even wager on sporting events through offshore sports books.
One of my reasons for moving was healthcare. I could not get health insurance in the USA because of pre-existing conditions. I couldn get it (at a very expensive rate), but all preexisting conditions would not be covered. Last December I spent a week in Saint Lukes Global City Medical Center which is a hospital I would go to over any hospital in America for quality care. My total bill came to less the the equivalent of $2,000 USD. In the USA it would have been over $50,000. I had surgery and all fees for doctors and everything was included in my bill.
The Volcker Bill is just another brick in the wall of oppression the USA is building around it's citizens. I read that over 500 Americans a day are expatriating to other countries and I believe it.
It is sad that the land of the free has become the land of government intervention.
One of my reasons for moving was healthcare. I could not get health insurance in the USA because of pre-existing conditions. I couldn get it (at a very expensive rate), but all preexisting conditions would not be covered. Last December I spent a week in Saint Lukes Global City Medical Center which is a hospital I would go to over any hospital in America for quality care. My total bill came to less the the equivalent of $2,000 USD. In the USA it would have been over $50,000. I had surgery and all fees for doctors and everything was included in my bill.
The Volcker Bill is just another brick in the wall of oppression the USA is building around it's citizens. I read that over 500 Americans a day are expatriating to other countries and I believe it.
It is sad that the land of the free has become the land of government intervention.
Where there's odds . . . there's hope.
Member Since Jan 14, 2010
556 posts
Sep 03, 2012 at 10:09
Question is, why do they do that? I don't think this is by choice. The economy has slowed down since the melt down in 2008, and it appears its slowing again the past few months - I think the point of these rules is to show they are do trying to do something to help stabilize the economy, although it may be too little too late.
The Volcker rule is the same as reducing leverage - once you decrease exposure, risk reduces. I just hope the effect of traders moving their businesses elsewhere won't overweight the point of the rule, which is to help to the economy, not ruin it further.
As to the health care - this isn't new as far as I'm aware - USA simply doesn't invest in this field as other countries do. I'm sure you found some disadvantages in the Philippines which you haven't encountered in the US - as the saying goes: 'the grass is greener on the other side'.
The Volcker rule is the same as reducing leverage - once you decrease exposure, risk reduces. I just hope the effect of traders moving their businesses elsewhere won't overweight the point of the rule, which is to help to the economy, not ruin it further.
As to the health care - this isn't new as far as I'm aware - USA simply doesn't invest in this field as other countries do. I'm sure you found some disadvantages in the Philippines which you haven't encountered in the US - as the saying goes: 'the grass is greener on the other side'.
Sep 03, 2012 at 20:35
It was very interesting to me that in many forums US Citizens complained about 'unfair leverage' with relation to trading contests ( a good example is over at the dailyfx.com forums which is FXCM, their king of the micro contest has one of the biggest payouts each month I've found). There are several threads which go into great details to try and level the lack of leverage available to US traders, which have come about as a result of Volker and Dodd-Frank.
What I found interesting is that 14,000+ old women put together petitions to send to Washington, yet we didn't hear of any online petitions or other measures from traders to send anything to Washington in favor of Not implementing either of the previous mentioned. However, traders had plenty of time to b***h about the unfairness of leverage.
'It is not the majority that rules but those few who take action'
Lastly, moving abroad,
Unless you like being over taxed there a numerous countries that offer better tax rates for traders than the US, IMHO you would be a poor business person if you didn't evaluate the best opportunities to keep more capital in your account.
Yes, James_Bond sometimes the grass REALLY is GREENER on the other side, not singling you out just the statement.
What I found interesting is that 14,000+ old women put together petitions to send to Washington, yet we didn't hear of any online petitions or other measures from traders to send anything to Washington in favor of Not implementing either of the previous mentioned. However, traders had plenty of time to b***h about the unfairness of leverage.
'It is not the majority that rules but those few who take action'
Lastly, moving abroad,
Unless you like being over taxed there a numerous countries that offer better tax rates for traders than the US, IMHO you would be a poor business person if you didn't evaluate the best opportunities to keep more capital in your account.
Yes, James_Bond sometimes the grass REALLY is GREENER on the other side, not singling you out just the statement.
Member Since Aug 22, 2012
11 posts
Sep 04, 2012 at 08:26
When it comes to greener grass I say the following in humor and without any political agenda.
When I lived in the USA I was in Texas in an area that sometimes would have over 100 days in a row of 100 degree temperatures and little rain. Since moving to the Philippines I have experienced three typhoons and just a few weeks ago we had one of the worst floods in Philippines history. Over a meter of rain a day fell for four straight days and it brought Manila to a halt with flooding everywhere. I kind of missed the dry Texas plains, but . . .
the grass is greener here. LOL
When I lived in the USA I was in Texas in an area that sometimes would have over 100 days in a row of 100 degree temperatures and little rain. Since moving to the Philippines I have experienced three typhoons and just a few weeks ago we had one of the worst floods in Philippines history. Over a meter of rain a day fell for four straight days and it brought Manila to a halt with flooding everywhere. I kind of missed the dry Texas plains, but . . .
the grass is greener here. LOL
Where there's odds . . . there's hope.
Member Since Jul 03, 2012
186 posts
Sep 04, 2012 at 12:38
James_Bond posted:
Question is, why do they do that? I don't think this is by choice. The economy has slowed down since the melt down in 2008, and it appears its slowing again the past few months - I think the point of these rules is to show they are do trying to do something to help stabilize the economy, although it may be too little too late.
The Volcker rule is the same as reducing leverage - once you decrease exposure, risk reduces. I just hope the effect of traders moving their businesses elsewhere won't overweight the point of the rule, which is to help to the economy, not ruin it further.
As to the health care - this isn't new as far as I'm aware - USA simply doesn't invest in this field as other countries do. I'm sure you found some disadvantages in the Philippines which you haven't encountered in the US - as the saying goes: 'the grass is greener on the other side'.
I disagree James. The economy is not some playground where socialists should be allowed to try something just so they can claim we tried and tried and tried. Yes, they do try but everything they have done has been and will be counter-productive. They do not listen to those people with knowledge about the situation and try to please the angry general public which has nothing better to do then scream tax the rich.
The situation is getting worse by the minute and soon it will be time to pay for all the mistakes made.
Pax puts the X in Forex.
Member Since Jan 14, 2010
556 posts
Sep 04, 2012 at 14:24
TheLastBear posted:
I disagree James. The economy is not some playground where socialists should be allowed to try something just so they can claim we tried and tried and tried. Yes, they do try but everything they have done has been and will be counter-productive. They do not listen to those people with knowledge about the situation and try to please the angry general public which has nothing better to do then scream tax the rich.
The situation is getting worse by the minute and soon it will be time to pay for all the mistakes made.
It's always easier said than done 😄. I'm sure in their point of view they're doing the best they can (to the best of their knowledge).
What would you do differently if you were in their shoes? I for example wouldn't try to scare off businesses out of the US for one, as that definitely can't be of any good for the economy.
Member Since Aug 22, 2012
11 posts
Sep 04, 2012 at 15:22
I think a lot of it is because America today is run by Goldman Sachs. Special interests have shaped the country more than the voters.
Where there's odds . . . there's hope.
Member Since Jul 03, 2012
186 posts
Sep 07, 2012 at 09:58
I would start by throwing out the tax code and implement a very low flat tax. I would tax consumption and not earnings. I would kill all regulation and replace it by simply regulation that works. I would have never allowed a single tax payer dollar to be wasted on a bailout. This is a big topic and I just throw a few snippets your way as I do not have the time to write a paper on it. Hope you understand.
Pax puts the X in Forex.
*Commercial use and spam will not be tolerated, and may result in account termination.
Tip: Posting an image/youtube url will automatically embed it in your post!
Tip: Type the @ sign to auto complete a username participating in this discussion.
