Regulators looking at prop trading of foreign debt

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Regulators looking at prop trading of foreign debt
from MarketWatch.com - MarketPulse
WASHINGTON (MarketWatch) - Regulators said Wednesday they are looking at whether to extend an exemption to the Volcker Rule to allow U.S. domiciled financial institutions to conduct proprietary trading in foreign government bonds. The Volcker Rule - named after an idea suggested by former Federal Reserve Chairman Paul Volcker - seeks to prohibit big insured banks' speculative proprietary derivatives and stock investments. The rule, which was proposed by bank regulators in October, provides an exemption for U.S. banks to conduct trading in U.S. government bonds. "That benefit is not extended to the government securities of other countries," said Federal Deposit Insurance Corp. acting Chairman Martin Gruenberg. "We are going to get comments on this and this will be one of the issues we will be looking at." Financial institutions in other countries have complained that the prohibition is likely to hurt the liquidity of sovereign debt in other countries because the trading is unlikely to be picked up by other institutions.