Nice piece by Bradley Keoun of Bloomberg today on how Citigroup (C) is planning to increase trading limits and add capital in its unit that trades stocks with the banks’ own money, also known as “proprietary trading,” which is at odds with the so-called Volcker Rule included in Senator Chris Dodd’s (Dem., CT) proposed financial overhaul legislation, introduced yesterday. Keoun as talking mostly with anonymous sources.
The prop trading group produces about $100 million a year in revenue, Keoun reports. As one source points out, Why should CEO Vikram Pandit not proceed with an expansion of the unit when it’s as yet unclear whether Dodd’s bill will pass or what the shape of it should be.
In related news, Bloomberg’s Matthew Leising writes that Morgan Stanley analyst Betsy Graseck expects Senators Jack Reed (Dem., Rhode Island) and�Senator Judd Gregg (Rep., New Hampshire) are proposing stiffer rules against banks’ trading in the over-the-counter derivatives market. Dodd’s bill, as Leising notes, excluded that language yesterday.
As Leising notes, however, definitions of “major swap participant” is still unclear in both Dodd’s bill and the House banking reform passed last fall.
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