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SIFMA Calls For Significant Changes To Current Volcker Rule Proposal At Congressional Hearing

Date 18/01/2012

SIFMA today called for significant changes in the Volcker Rule before a joint hearing of the House Financial Services Subcommittees on Capital Markets and Government Sponsored Enterprises, Financial Institutions and Consumer Credit that was examining the impact of the Rule.

In testimony on behalf of SIFMA’s Asset Managers Group (AMG), Douglas Peebles, chief investment officer and head of Fixed Income at AllianceBernstein noted that the rule, as proposed, could have a significant negative impact on market making.

“The proposal clearly fails to account for different types of market making environments, particularly those related to fixed income and over-the-counter (“OTC”) markets, where market makers regularly trade as principal due to the high degree of fragmentation and intermittent liquidity,” Peebles said. “We believe the failure to take into account different OTC market making activities reflects a major oversight in the proposal and could have devastating effects on fixed income market that exhibit intermittent liquidity.”

Peebles full testimony on behalf of SIFMA AMG can be found at the following link: http://www.sifma.org/issues/item.aspx?id=8589937037  

Additionally, in testimony submitted for the record, SIFMA addressed a number of concerns with the rule, including:

  • The proposal’s market-making exemption and its’ impact on different markets, including the municipal securities and securitization markets;
  • The Rule’s original intent for limiting investments in hedge funds and private equity funds has been lost in the current proposal;
  • The proposal is more like a concept release than a concrete proposal;
  • The proposal’s conformance period should be given real meaning, as Congress intended;
  • The proposal is unclear as to who should be regulating and enforcing the Volcker Rule; and
  • The Rule’s benefits, as implemented in the proposed regulations, are likely to be dwarfed by the costs.

SIFMA’s full statement for the record can be found at the following link: http://www.sifma.org/issues/item.aspx?id=8589937038.