The regulation is almost 300 pages and contains over 1,000 separate questions for banks and their associates. That's not because the regulators delight in abusing the regulated, but because the regulators are grappling with an impossible problem-how to prohibit proprietary bond trading while preserving bank activities that are vital to the health of the capital markets. ... [I]n making markets, a bank is clearly trading for its own account. Moreover, bank bond trading adds vital liquidity to these markets-without it, the spreads between bids and asks would be much wider ... Banks will stop their activities if their compliance with regulations isn't assured. .. So why is proprietary trading by banks now to be prohibited? Although Dodd-Frank was intended to prevent future financial crises, no one has yet been able to point to bank proprietary trading as a factor in weakening the banks before the 2008 financial panic.
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