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Fifth Annual Cass-Capco Risk Management Conference
April 19, 2012: Cass Business School, London, UK

The fifth annual conference of the Cass-Capco Institute on Risk brought together practitioners and academics to discuss how risk can be managed to lessen its impact on business and economic growth... Read More

Banking in the “Glocal” World
March 1, 2012: Zurich, Switzerland

Swiss Finance Institute and Capco Institute were pleased to present the Inaugural Annual conference of the SFI-Capco Institute Paper Series on Banking in Zurich, Switzerland. The conference brought together leading financial experts and scholars to discuss... Read More

The Future of Proprietary Trading

Installment I: Capco Regulatory Reform Series

Recent attempts at financial reform, such as the Dodd-Frank Act, restrict proprietary trading for speculative purposes, but not for other purposes such as market making and hedging. This delineation raises immediate questions regarding the reach and enforcement of reform provisions. Also to be determined is the effect proprietary trading limits will have on trade flow.

The lines are already blurred between proprietary trading and trading done on behalf of customers. For example, today a customer may want to sell a block of securities and an investment firm may or may not choose to position some of that block to make additional money. That decision impacts whether the transaction is considered proprietary trading.

Financial reform aims to keep firms from taking a position in something unless they have an offsetting trade, which will be difficult to police. Questions still to be resolved through regulatory rulemaking include how severely and along what dimensions trading will be restricted. Will the restrictions apply only to specified volumes or certain types of products? Will they be based on the intent of the transaction? Or, will the restrictions be applied across the board?