The Wall Street Journal has a piece highlighting the difficulty of implementing the Volcker Rule, part of the not-passed-by-the-Senate-yet financial "reform":
It isn't clear if regulators will see the shifts as anything more than sleight of hand. The Volcker rule, named for Obama Administration adviser and former Federal Reserve Chief Paul Volcker and passed by the House last week as part of the financial-overhaul bill, directs federal officials to disallow most proprietary trading at banks unless the trades are meant to serve near-term client demand or reduce risk.
But does that mean a trader can't buy a bunch of bonds in anticipation that investors would want to buy them a week later at a higher price? What if the trader holds the bonds for a month or two? Such scenarios make it difficult to draw a clear line between proprietary trading and the sort of client-centered trades typically handled by separate desks at most firms. Regulators could take years to establish clear rules.
