Commission On Banking Standards Publishes Proprietary Trading Report

In its First Report (which said that the ring-fence needed electrification) of 21 December 2012 – see volume 1, volume 2 (written evidence) and post here – the Parliamentary Commission on Banking Standards embarked on considering fully the consequences and practicalities of supplementing the proposed UK ring-fence with something similar to the Volcker Rule (see First Report at para 94, see Chairman of the Federal Reserve Paul Volcker’s evidence to the Commission here). To this end the Commission published its Third Report – entitled “Proprietary Trading” – on 15 March 2013; the report contains its conclusions and recommendations; see also volume 2 (written evidence). The Commission has explained that it will produce a further report in May 2013 which will make wider recommendations in connection to banking reform.

Proprietary Trading

The term “proprietary trading” when applied to a bank could in theory refer to any trading activity which results in a proprietary position for that bank – in other words, where price movements in the relevant market affect the bank’s bottom line.

At paragraph 10, the report explained that:

There is no commonly-accepted definition of proprietary trading. Most activity undertaken by banks results in some form of proprietary position.