Bond Dealers of America



Volcker Rule Clarity

The BDA continues to have significant concerns regarding the Volcker Rule and the impact on the principal trading business at bank affiliated middle-market, regional and small fixed income dealers. As currently written, the BDA believes principal trading in non-exempt securities like corporate bonds and municipal revenue bonds by bank affiliated broker dealers would be deemed as proprietary trading and disallowed by the Volcker Rule, essentially forcing bank affiliated BDs to act as agent when selling non-exempt securities. The BDA is working very closely with federal regulators to ensure these concerns are understood and appreciated and that changes are made before the Rule is finalized.

On April 19, the SEC posted the following press release on its website – a┬ánotice from the SEC, Fed, CFTC, FDIC and OCC clarifying the compliance obligations through the two year conformance period for the yet to be finalized Volcker Rule. This decision to provide much needed clarity to the markets is in direct response to the BDA, and others, expressing significant concern over the potential obligations to market participants arising from the Rule prior to it being finalized and during the two year conformance period.

This concern became heightened with the Fed and others acknowledging publicly that the statutorily required implementation date of July 21, 2012 would not be met.

The guidance issued provided that “good faith” steps toward complying with the Rule once it is finalized is all that will be required until the end of the conformance period, at the earliest.

The BDA transmitted a letter to all the regulators engaged in finalizing the Volcker Rule encouraging them to clarify the performance obligations to market participants on the required implementation date, as well as during the statutorily required two year conformance period.

The BDA letter was clear that there should be few, if any, obligations until the end of the conformance period, which would be July 21, 2014.

View the BDA letter here.

View the joint news release here.