Will Restricting Proprietary Trading and Stricter Derivatives Regulation Make the US Financial System More Stable?

PSL Quarterly Review, Vol. 64, No. 258, pp. 227-247, 2011

21 Pages Posted: 4 Oct 2011

See all articles by Jan A. Kregel

Jan A. Kregel

Bard College - The Levy Economics Institute

Date Written: October 4, 2011

Abstract

Two of the major provisions of the Dodd‐Frank Wall Street Reform and Consumer Protection Act, passed into law on July 21 2010, aim to reduce speculation with financial institutions own funds using highly leveraged derivatives. The so‐called “Volcker rule” limits the ability to trade as principal in what is known as “proprietary trading” and the Lincoln Amendment or the “push out” rule limits derivatives dealing for regulated, insured banks. A complement to the Lincoln amendment requires that all over the counter derivatives be cleared through official mechanisms and traded on regulated exchanges similar to those used for commodities.

Keywords: financial regulation, naked CDS, Volcker Rule, Dodd‐Frank, Lincoln Amendment

JEL Classification: E11, G01, B50, H12

Suggested Citation

Kregel, Jan A., Will Restricting Proprietary Trading and Stricter Derivatives Regulation Make the US Financial System More Stable? (October 4, 2011). PSL Quarterly Review, Vol. 64, No. 258, pp. 227-247, 2011. Available at SSRN: https://ssrn.com/abstract=1938162

Jan A. Kregel (Contact Author)

Bard College - The Levy Economics Institute ( email )

Blithewood
Annandale-on-Hudson, NY 12504
United States
845-758-7700 (Phone)
845-758-1149 (Fax)

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