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The proprietary trading of most government bonds, ranging from Treasurys to muni bonds, is deemed acceptable; the trading of a finite group of foreign sovereign securities is, too. And under a concept known as "liquidity management," banks are permitted to hold any positions that help ensure their near-term liquidity, or cash, needs.
The rule has been the subject of intense interest on Wall Street.
The five federal agencies who wrote it – the Federal Reserve, the Federal Deposit Insurance Corp, the Securities and Exchange Commission, the Commodity Futures Trading Commission, and the Office of the Comptroller of the Currency – received more than 18,000 comments after the initial draft was presented to the public two years ago.
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In anticipation of the final rule, most banks divested themselves of any dedicated proprietary-trading desks, selling entire subsidiaries to other companies, replacing internal capital with client funds, or simply letting traders go.
If passed Tuesday, the Volcker Rule will be phased in over a two-year period, with the majority of it becoming effective by the middle of 2015.