The Volcker Rule has everybody on Wall Street scrambling. The provision in the new financial overhaul bill requires banks to stop making bets with their own money. To comply with the rule, proprietary traders at some banks are moving, while some are simply getting new roles.
At Citigroup, a team of prop traders may be moving to its hedge fund unit, Citi Capital Advisors. The team would be set up as hedge fund managers and will seed their funds, then use money from outside investors to recoup their stakes, reports Bloomberg News.
But that's just one of the ways finance firms are getting around that pesky Volcker rule.
At Goldman Sachs, prop traders are getting a new name: asset managers, a sidestep that other Wall Street firms may mimic, according to Fox Business.
The prop traders were moved into Goldman's asset management division, where they can talk with Goldman clients and then place their own bets using client input and company capital. By simply labeling these bets "customer-related," Goldman will avoid large-scale layoffs in the unit.
Bank of America may also follow suit: a spokesman recently said they have no plans to cut their prop traders off. Instead, BofA is getting them to become more customer-facing, taking ideas from clients instead of coming up with them themselves, and then using the firm's money to place bets.
Write to Shareen Pathak