JPMorgan Chase London Whale G: Hedging versus Proprietary Trading

Yale Program on Financial Stability Case Study 2014-2G-V1

12 Pages Posted: 18 Mar 2015

See all articles by Arwin G Zeissler

Arwin G Zeissler

Yale University - Yale Program on Financial Stability

Andrew Metrick

Yale School of Management; National Bureau of Economic Research (NBER); Yale University - Yale Program on Financial Stability

Date Written: December 1, 2014

Abstract

In December 2013, the primary United States financial regulatory agencies jointly adopted final rules to implement Section 619 of the Dodd-Frank Wall Street Reform and Consumer Protection Act, which is often referred to as the “Volcker Rule”. Section 619 prohibits banks from engaging in activities considered to be particularly risky, including proprietary trading and owning hedge funds or private equity funds. Banking regulators designed the final rule against proprietary trading in part to prevent losses like the $6 billion London Whale loss that took place in 2012 at JPMorgan Chase. Given the controversial nature of the Volcker Rule, it is not surprising that the regulatory agencies received 18,000 comment letters, including a 67-page letter from JPMorgan Chase.

Keywords: Systemic Risk, Financial Crises, Financial Regulation

JEL Classification: G01, G28

Suggested Citation

Zeissler, Arwin G and Metrick, Andrew, JPMorgan Chase London Whale G: Hedging versus Proprietary Trading (December 1, 2014). Yale Program on Financial Stability Case Study 2014-2G-V1. Available at SSRN: https://ssrn.com/abstract=2577837 or http://dx.doi.org/10.2139/ssrn.2577837

Arwin G Zeissler

Yale University - Yale Program on Financial Stability ( email )

165 Whitney Avenue
P.O. Box 208200
New Haven, CT 06520-8200
United States

Andrew Metrick (Contact Author)

Yale School of Management ( email )

165 Whitney Avenue
New Haven, CT 06511
United States
(203)-432-3069 (Phone)

HOME PAGE: http://faculty.som.yale.edu/andrewmetrick/

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Yale University - Yale Program on Financial Stability

165 Whitney Avenue
P.O. Box 208200
New Haven, CT 06520-8200
United States

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