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The Expressive Synergies of the Volcker Rule

66 Pages Posted: 20 Aug 2012 Last revised: 8 Apr 2013

Onnig H. Dombalagian

Tulane Law School

Date Written: November 18, 2012

Abstract

In this manuscript, I propose an alternative implementation of the Volcker Rule, Section 619 of the Dodd-Frank Wall Street Reform and Customer Protection Act of 2010. The Volcker Rule restricts the proprietary trading of U.S. banks and their affiliates to certain “client-oriented” activities, such as market making. Under my proposal, federal financial regulators would implement the Rule’s “market-making-related activities” exemption to realize synergies with Dodd-Frank’s initiatives in the area of swaps regulation and the regulation of over-the-counter markets. The manuscript draws upon the academic literature regarding expressive law, the history of federal banking legislation, and the text of the Dodd-Frank Act to argue that federal financial regulators have the discretion to implement the Rule’s mandate in a manner that transcends the twin concerns of safety and soundness and mitigation of conflicts of interest. I further argue that such an implementation may well be essential to the vitality of the Volcker Rule, in light of the parsimonious implementation currently proposed by the federal financial regulators and the political forces aligned in favor of the Rule’s repeal.

Keywords: Volcker Rule, proprietary trading, expressive law, swaps, over-the-counter market, market maker, market structure

JEL Classification: G28, K22

Suggested Citation

Dombalagian, Onnig H., The Expressive Synergies of the Volcker Rule (November 18, 2012). Boston College Law Review, Vol. 54, No. 2, 2013; Tulane Public Law Research Paper No. 12-15. Available at SSRN: https://ssrn.com/abstract=2097007 or http://dx.doi.org/10.2139/ssrn.2097007

Onnig Hatchig Dombalagian (Contact Author)

Tulane Law School ( email )

6329 Freret Street
New Orleans, LA 70118
United States

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