WASHINGTON, DC–The Federal Reserve proposedrevisions to the Volcker Rule on Wednesday.

The Volcker rule, which is part of the Dodd-Frank Act, prohibitsbanking entities from engaging in proprietary trading and fromowning or controlling hedge funds or private equity funds. The Fednoted in its request for comments that the complexity of the rulehas led to confusion about how to implement it. “The proposal willaddress some of the uncertainty and complexity that now make itdifficult for firms to know how best to comply, and for supervisorsto know that they are in compliance,” Chairman Jerome H.Powell said.

Constrained Market-Making

The CRE Finance Council has maintained that thethe Volcker Rule is one of several regulations that has led toconstrained secondary market-making. In an alert published inresponse to yesterday's proposal the association noted that “in itscurrent form, the Volcker Rule impinges upon the ability of banksto hold requisite inventories of secondary market securities,including commercial mortgage-backed securities, thereby damagingmarket liquidity.”