Chicago Shareholder Juan Arciniegas and London Partner Sam Tyfield recently published the article, “Volatility and the Volcker Rule: The Metamorphosis of the US Equities Markets” in the March issue of The Investment Lawyer.
Mr. Arciniegas and Mr. Tyfield note that the US equities markets dealt with a period of sustained losses during the 2018 holiday season, and the cause of this is up for debate. The authors examine the explanations for such volatility offered by market participants and US Treasury Secretary Steven Mnuchin while focusing primarily on high frequency trading and the Volcker Rule.
According to the article, “The Volcker Rule prohibited banks and their affiliates from using their own proprietary capital to speculate on financial markets and restricted them from owning, investing or sponsoring various types of alternative investments. [It] has been perceived as one of the world’s more complex and prescriptive pieces of legislation.”
The Investment Services lawyers conclude that many factors, including market structure, computerized models and recent regulatory developments, could be to blame for the recent volatility, but caution against a “hunt for an easy target to which blame should be put for the prices of US equities dropping.”