Finance and Economics Discussion Series (FEDS)
January 2025
Impact of the Volcker Rule on the Trading Revenue of Largest U.S. Trading Firms During the COVID-19 Crisis Period
Zach Modig, Hulusi Inanoglu, and David Lynch
Abstract:
Using a novel data collection, we examine the impact of the Volcker Rule on trading revenue of the 21 largest U.S. trading firms during the 100 day stress period centered on the COVID-19 financial crisis. We find that despite the market volatility, trading profits were consistent with volume-driven fees, commissions, and widening of the bid-ask spread. This work adds to the growing body of evidence that a consequence of the Volcker Rule on firm revenue associated with trading is increased financial stability and decreased risk exposure to market shocks.
Keywords: Bank Trading, Supervision and regulation of financial markets and institutions, Systemic Risk, Volcker Rule
DOI: https://doi.org/10.17016/FEDS.2025.005
PDF: Full Paper
Disclaimer: The economic research that is linked from this page represents the views of the authors and does not indicate concurrence either by other members of the Board's staff or by the Board of Governors. The economic research and their conclusions are often preliminary and are circulated to stimulate discussion and critical comment. The Board values having a staff that conducts research on a wide range of economic topics and that explores a diverse array of perspectives on those topics. The resulting conversations in academia, the economic policy community, and the broader public are important to sharpening our collective thinking.