“…We engaged Epsilon to be our strategic partner…. I am happy to say that Epsilon met or exceeded our expectations on this project. We successfully completed the RFP project and selected a system that was right for our business…”

FHLB
Chief Financial Officer

Volcker Rule

OVERVIEW

The Volcker rule limits banks from speculative Proprietary Trading including High Frequency Algorithmic Trading.  The rule reduces conflict of interest, and requires transparency by disclosing any bank relationships with Hedge Funds.   The total of all of the banking entity’s interests in hedge funds or private equity funds cannot exceed 3% of the Tier 1 capital of the banking entity.

In short, the rule generally prohibits banks from:

  • Engaging in short-term proprietary trading of securities, derivatives, commodity futures and options on these instruments for their own account.
  • Owning, sponsoring, or having certain relationships with hedge funds or private equity funds, referred to as covered funds.

In order to regulate risk capital, the Volcker Rule says that regulators are required to impose upon institutions capital requirements that are “countercyclical”, so that the amount of capital required to be maintained by a company increases in times of economic expansion and decreases in times of economic contraction,” to ensure the safety and soundness of the organization.

In response to the Volcker Rule and in anticipation of its ultimate impact, a number of commercial banks and investment banks operating as bank holding companies have downsized or disposed of their proprietary trading desks.

Contact Us

 

 

Epsilon Consulting Services

90 Broad Street, Suite 2003
New York, NY 10004

 

(347) 770-1748

(212) 931-0572

 


 

Careers

 

If you are interested in joining Epsilon’s financial consulting firm in New York City, please visit our Careers page to view jobs and submit a resume for consideration. See our service areas page for specific locations we provide consultations in.