“We cannot support measures which disrupt market functions or increase systemic risk, ultimately failing to achieve what Congress and the Administration sought to accomplish with this legislation,” Ryan said. “For example, we oppose the Volcker Rule. We are concerned over its extended and, in many cases, unintended impact on traditional market-making activities at the expense of liquidity in U.S. markets.”
Ryan said that reduced liquidity is a major concern in the financial sector, and that the Volcker Rule conflicts with Congress’s market-making exemption for banks and other institutions.
“Market makers provide immediacy by selling assets to investors who wish to buy them, and by buying assets from investors who wish to sell when there isn’t a willing investor on the other side of the trade,” Ryan said. “The proposed regulation’s overly narrow definition of permitted market-making activity, along with its significant compliance requirements, would substantially discourage market makers from playing that important role.”
Ryan also highlighted a number of SIFMA recommendations to streamline the proposal, including permitting market-making activity that is focused on the customer and the development of alert systems to indicate problems in the market.
“Additionally, the rule should not analyze market making on a transaction-by-transaction basis. The proposal should instead focus on allowing financial intermediation – standing between buyers and sellers, which is what market makers do – permitted by the statute,” Ryan said. “And the underlying assumption that any activity conducted by a financial institution to make markets is considered prohibited proprietary trading needs to change.”