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No proprietary trading for banks

  • #1
  • First Post: Jan 21, 2010 3:25pm Jan 21, 2010 3:25pm
This proposal would prohibit banks from running proprietary trading operations solely for their own profit and sponsoring hedge funds and private equity funds. How this will change the trading enviroment in the future ?

http://www.bloomberg.com/apps/news?p...d=aGwoMdcKbVFk

http://en.wikipedia.org/wiki/Proprietary_trading
  • #2
  • Jan 21, 2010 11:41pm Jan 21, 2010 11:41pm
low volume high volatility high spread?
  • #3
  • Jan 22, 2010 12:15am Jan 22, 2010 12:15am
affected banks will launch a new subcompany to trade ...
when u r that big , u will find way to skip rules
To Live is the rarest thing in the world , Most people exist , that is all
  • #4
  • Jan 22, 2010 12:30am Jan 22, 2010 12:30am
Either way, I doubt this would affect liquidity too much. As I understand it, this only applies to American banks.

New UK branches, anyone?

If retail brokers can do it (and have already been doing it, thanks to the NFA rules), I'm sure the big boys will find a way to do something similar on a larger scale.
  • #5
  • Jan 22, 2010 2:41am Jan 22, 2010 2:41am
Proprietary trading is "directional bets" , but banks should still be able to market making i guess ...
  • #6
  • Jan 22, 2010 4:54am Jan 22, 2010 4:54am
The UK looks certain to follow the US in implementing these heavy handed regulations. The current govt (led by the uncharismatic cyclops Gordon Brown) is fairly unpopular and by all indications have come to the end of their tenure in the political cycle. The Conservative opposition have stated that if elected in May they have similar plans to kick the scapegoats in the financial sector where it hurts, especially if there is international support. I was reading some of the comments on the BBC website regarding Obama's proposal and unsurprisingly about 95% of comments backed it, and so I expect the Conservatives will push this to the forefront of their political manifesto, further increasing their likelihood of coming to power.

The problem with democracy is that by and large, the populace is comprised of complete morons who are barely qualified to tie their own shoe-laces.
  • #7
  • Jan 22, 2010 6:34am Jan 22, 2010 6:34am
Quoting birdt
complete morons who are barely qualified to tie their own shoe-laces.
And fat cats that can't reach them.

Obama said never again would tax payers have to bail out banks who are too big to fail. I don't see this as heavy handed. These banks almost caused (and the jury is still out) the whole financial system to collapse. Now, that's what I call heavy handed.

If a bank has a trading arm and his funding is strictly regulated as a percentage of the bank's net worth what could be wrong with that? Less liquidity in the markets? I'm all for that. The markets are way too volatile for industry to make long term plans with regard to, say, R & D and that's part of the reason why this planet finds itself past peak energy production with shaky replacements for fossil fuels.

I only hope that since the banking industry is necessarily multi-national governments make it impossible for them to break the new rules. After all, we all want our mortgages as cheap as possible from a reliable lender, don't we? Unless we earned a million in bonuses and don't need to give a shit about mortgages or mortgage payers. There's too many of them to find space for in the jails. Slippery people.
Gone to a better place
  • #8
  • Edited 8:07am Jan 22, 2010 7:23am | Edited 8:07am
Quoting smikester
And fat cats that can't reach them.

Obama said never again would tax payers have to bail out banks who are too big to fail. I don't see this as heavy handed. These banks almost caused (and the jury is still out) the whole financial system to collapse. Now, that's what I call heavy handed.

If a bank has a trading arm and his funding is strictly regulated as a percentage of the bank's net worth what could be wrong with that? Less liquidity in the markets? I'm all for that. The markets are way too volatile for industry to make long term plans...
The banks are mere scapegoats for the inevitable repercussions of a generation of excess funded by credit. The market didn't fail, it was just going to clear out the deadwood, it only appeared to fail because the governments had political incentives to postpone the bust that always follows a boom. More regulations will just lead to a further dead-weight loss in efficiency in the financial markets as they always do, there will be even less lending by the banks, the financial sector will transfer operations abroad to economies with less restrictive legislation. It won't just be bankers who are unemployed, there are an array of knock on effects that will be detrimental to our economy and government revenue that we can ill-afford.
Lower interest paid on savings as banks become less profitable.
Lower yields for shareholders.
Restricted lending, which in turn leads to:
Higher unemployment.
Brain-drain of productive financial minds to nations with lower taxes.
It is arguable that there will be greater volatility in the markets if liquidity dries up.
Your mortgage will probably get more expensive too as banks seek to rein in risk with the unemployment out there.
etc....

Until someone comes with something better, the free market is still the most efficient method of allocating resources. This is not a move motivated by economics, it is purely political. The uncharismatic cyclops may not win any popularity contests but no-one doubts his intellect when it comes to the economy. That slimeball David Chameleon and George "!£%"£$ Osborne would sell their own mothers for half a stick of Chewits. Now they're a pair of slippery customers.
  • #9
  • Jan 22, 2010 7:46am Jan 22, 2010 7:46am
this is what i posted on another thread. i agree with u bird, this too big to fail was just an escape goat. if they are worried about it now then why did they bailed out these banks in the first place. makes u wonder if this is just for show now that scott brown has been elected to the senate. the dems want second term and this just step for them to show that "hey we care about the american people." NOOOOOT. they dont care about the american people. let the republicans win in the next election.


"hows that hope and change working out for those that voted him in office?

lets see:
HOPE= i hope that the govenment will lend a hand to help me get out of this crisis that I got myself into.
CHANGE=by changing the laws the government will make sure that whatever I do whether good or bad I'm not respondsible because the I'm not at fault here. It was just the wrong decision that I made and the government will get me out of this mess.

I ask u all this, is this the hope and change that the obama supporters wanted? I for one dont need the government to decided whats best for me. I will make that decision. So he did promise hope and change. Now just think about it. my 2 cents."

http://cdn.forexfactory.com/images/misc/progress.gif

  • #10
  • Jan 22, 2010 8:20am Jan 22, 2010 8:20am
Quoting birdt
The uncharismatic cyclops may not win any popularity contests but no-one doubts his intellect when it comes to the economy. That slimeball David Chameleon and George "!£%"£$ Osborne would sell their own mothers for half a stick of Chewits. Now they're a pair of slippery customers.
I do doubt his intellect Birdt and it's rooted in his sheer arrogance. He thought he was so clever he'd managed to 'cure' boom and bust - a functioning part of every economy in the past 200 years. Having claimed he'd calmed the waves of the ocean he was then blinded to the risk of a bust. I don't blame him for not seeing the credit bubble (most people didn't see it), but I do hold him responsible for assuming they'd never be a bust ever again. I don't doubt Osbourne would have made more of a hash of it, but there we go. Rocks and a hard place.

And as for scapegoating the banks - the banks were responsible for the excess credit. It was their own risk controls that went out the window, and while excessive regulation is dangerous, surely ensuring that short-term benefits at the risk of long-term ruin are never prioritised again is a sign of a healthy economy. I don't think anyone advocates unrestrained capitalism; the question of intervention is one of degree, not of yes or no.
  • #11
  • Jan 22, 2010 8:46am Jan 22, 2010 8:46am
Quoting birdt
That slimeball David Chameleon and George "!£%"£$ Osborne would sell their own mothers for half a stick of Chewits. Now they're a pair of slippery customers.
As usual I agree with a lot of what you say but not all but thank you for bringing in the British Government. We don't deserve that load of self regarding nitwits.
Gone to a better place
  • #12
  • Jan 23, 2010 3:15am Jan 23, 2010 3:15am
If you treat every problem with a new law/regulation, it is just a matter of time before you can't move.

If Obama is going to ban proprietary trading for banks, he might as well ban soda, fried food, cigarettes and everything else which might hurt people.
  • #13
  • Jan 23, 2010 9:30am Jan 23, 2010 9:30am
I hereby retract any comment about Brown and his economic intellect. The Tobin tax is back on the table according to this article:

http://www.guardian.co.uk/business/2...in-tax-banking

Taking off my trading hat and ignoring the ramifications of what this would mean for me, the financial sector are the gears upon which the foundations of our Western economies are built. Resentment, distrust and envy of 'fat cat bankers' aside, this is a bit hasty don't you think? We should be greasing the wheels of capitalism to increase productivity and efficiency to pull ourselves out of the recession, not throwing spanners in to the works. Regulation always results in a dead-weight loss in economic efficiency. How much are you willing to sacrifice to spite the bankers? Their loss is not our gain.
  • #14
  • Edited 10:04am Jan 23, 2010 9:44am | Edited 10:04am
Quoting birdt
I hereby retract any comment about Brown and his economic intellect....
I couldn't agree more. However there's a lot of water to pass under the bridge yet and I would be astonished if this were pushed through. I simply don't believe Brown has the political capital or holds enough sway at home or abroad to make this a reality.

Addition: From the FT (http://www.ft.com/cms/s/0/cf57a4a4-e...feab49a.html):

But Tim Geithner, US Treasury secretary, told the G20 nations last month that the US was unwilling to back a tax on daily financial market activity.

Opposition was also voiced by Dominique Strauss-Kahn, the IMF managing director, who said the Tobin tax was "a very old idea that is not really possible today".


ENDS


Maybe there is some sanity left in the world (although this story is from 12 December).

Dan
  • #15
  • Jan 23, 2010 9:46am Jan 23, 2010 9:46am
Now this is just silly.


I respect the president because he is in authority over the nation, but I do not agree with his policies.
  • #16
  • Jan 23, 2010 9:59am Jan 23, 2010 9:59am
if banks can not trade
can not increase fees
can not take any actions to increase profitability

How do they pay back the tarp loans?



great photo: policy maker hard at work.

http://riverdaughter.files.wordpress...ead-up-ass.jpg
  • #17
  • Jan 23, 2010 1:03pm Jan 23, 2010 1:03pm
Quoting tar
Proprietary trading is "directional bets" , but banks should still be able to market making i guess ...
Are you sure? If they can still being market makers the issue will not affect individual traders like us, only if 1:10 maximum leverage approved.
  • #18
  • Last Post: Jan 25, 2010 7:34am Jan 25, 2010 7:34am
Quoting birdt
Resentment, distrust and envy of 'fat cat bankers' aside, this is a bit hasty don't you think? We should be greasing the wheels of capitalism to increase productivity and efficiency to pull ourselves out of the recession, not throwing spanners in to the works. Regulation always results in a dead-weight loss in economic efficiency. How much are you willing to sacrifice to spite the bankers? Their loss is not our gain.
It might be a bit hasty, but I am talking about the ones who managed the financial rout. I don't have an ounce of envy for anyone who bankrupts a bank.

If I invested in a hedge fund and lost money I wouldn't use them again. You surely don't agree that they should be given a second chance with public funding?

I mean, this is the road to Communism of the worst sort. Surely not, help me here. What's your suggestion?
Gone to a better place
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