Structured And Market-Linked Product News For Inquiring Minds (REVERSEinquiries: Volume 1, Issue 3)

The Proposed Volcker Rule Amendments

In late May, the Federal Reserve approved the release for comment of proposed amendments to the Volcker Rule. The other four agencies that share in rulemaking authority for the rule subsequently also approved release of the proposed rulemaking.

In addition to tiering banking entities based on the size of their trading assets and liabilities, which should not affect the most frequent issuers of structured products, there are a fair number of proposed changes relating to proprietary trading that will affect structured product issuers. The proposed revisions would replace the intent purpose test of the proprietary trading definition with an objective accounting prong. The accounting prong is intended to capture instruments that are recorded at fair value. While it is clear that the accounting prong would cover derivatives, additional clarification may be required in order to understand how it w related to a structured note). Certain