Prop Trading Ban Set to Increase Hedge Fund Startups

[forexlawman]

The effects of the much talked about "Volcker Rule" are already being felt as banks shed or reorganize their prop desks in anticipation of coming regulations. The dynamic has left many successful prop traders looking for a new home. While many of these displaced traders will surely join existing funds, expect that many others will form new funds.

While you might expect these traders to achieve success in the private fund world, there are significant challenges which they must overcome, including operational hurdles and restrictions on the use of past performance in marketing a fledgling hedge fund.

We have been fascinated by this development and recently covered the story in depth at this link http://www.pleaseposttheartical.com...anecdotal evidence of this trend in practice.

 

[topeak]

interesting.

 

[fanews]

the regulators would let the banks have 3 years to exit their prop trading business. volker rule would just reduce volume to pre-1997 levels..which is why the NYSE and exchange mergers. the exchanges know this would impact their revenue if volume decreases 50% in the next 3 years from today

volume is already dropping for intraday volume

90% of the volume is institutinoal HFT runned by the banks or investment bank.

volume should drop 50% or more. the banks are main source of capital to the financial markets. even individuals borrow money from the banks for personal account..so if the bank prime broker close their business.

even a 50% drop in exchange volume is still a lot of volume compared to the 80's and early 90's in terms of market participants.

Quote from forexlawman:

The effects of the much talked about "Volcker Rule" are already being felt as banks shed or reorganize their prop desks in anticipation of coming regulations. The dynamic has left many successful prop traders looking for a new home. While many of these displaced traders will surely join existing funds, expect that many others will form new funds.

While you might expect these traders to achieve success in the private fund world, there are significant challenges which they must overcome, including operational hurdles and restrictions on the use of past performance in marketing a fledgling hedge fund.

We have been fascinated by this development and recently covered the story in depth at this link http://www.pleaseposttheartical.com...dence of this trend in practice. [/B][/QUOTE]

 

[RiprockDash]

Quote from fanews:

the regulators would let the banks have 3 years to exit their prop trading business. volker rule would just reduce volume to pre-1997 levels..which is why the NYSE and exchange mergers. the exchanges know this would impact their revenue if volume decreases 50% in the next 3 years from today

volume is already dropping for intraday volume

90% of the volume is institutinoal HFT runned by the banks or investment bank.

volume should drop 50% or more. the banks are main source of capital to the financial markets. even individuals borrow money from the banks for personal account..so if the bank prime broker close their business.

even a 50% drop in exchange volume is still a lot of volume compared to the 80's and early 90's in terms of market participants.

imo exchanges are looking to merge partly for synergies, but also to position themselves for the legislative drive for vanilla OTC contracts to move onto regulated venues. They're not doing it because of glass-steagall the sequel.

HFT might well be hit by regulation too, whoever the participants are.

anyway - more hedge fund start ups because of volker rule? I dont see it. If you're a prop trader in an IB it'd be much simpler to get a job in an established firm. a prospectus that says "i was front running flow, but not anymore" isn't going to get many subscribers.