Traders, you better get ready for changes to your pay.
A new regulation proposes an additional restriction be added to the Volcker rule.
If it passes, Wall Street firms might be forced to alter the way they compensate traders for their market-making activities.
According to a draft of the Volcker rule dated August 11 that was reviewed by Bloomberg –
The rule, which aims to ban most proprietary trading by banks with federally insured deposits, would exempt trades related to market-making as long as the activity met at least seven standards, or principles. One principle would be that traders get paid from fees and the spread of the transactions rather than the appreciation or profit from their positions, according to a copy of the draft reviewed by Bloomberg News.
That’s a direct attack on year-end bonuses, which are often based on profit.
Named for former Federal Reserve Chairman, Paul Volcker, the rule is currently being written by five different regulatory agencies in Washington, D.C.
The rule could be released as soon as October, the report said.
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