US banks seek new posts for proprietary traders, newspaper report claims

7 July 2010

Banks in the US are looking to change the roles of their top traders as the authorities plan to overhaul regulation within the financial services industry.

According to unidentified sources, Citigroup is moving approximately 24 traders from its proprietary trading desk to work with other company clients, the Wall Street Journal reported.

Other financial institutions are thought to have moved proprietary traders to work with customer-focussed trades.

The move is in part due to new regulations which are being introduced as part of the Volcker Rule recently passed by Congress .

So-called after former Federal Reserve head Paul Volcker, the legislation will limit the amount of proprietary trading banks can participate in as part of a wider strategy to reduce their exposure to risk.

Joseph Vitale, a partner in the bank-regulatory practice at law firm Schulte Roth & Zabel LLP, told the news provider: “Certainly, there will be opportunities to put some of these professionals to work doing what they do best in other parts of the firm.

"The question is to what extent will they be trading with the house's money versus client money?"

Sources cited in the Wall Street Journal’s article believe the implementation of the new rules could lead to some banks instead taking more risks with client trades.

By Jim Ottewill

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