Suzy Khimm Gets It On “Prop Trading”

On the Volcker Rule. She appears to be citing Craig Pirrong, who also seems worth a read:

The problem is, even if you agreed with Posner and Weyl in principle [to have a 'financial FDA' to 'vet' financial products], distinguishing between “hedging” and “speculation” is no easy task. That’s essentially what the Volcker Rule is trying to do, and it’s spawned a mind-bogglingly complex 300-page regulation.

Wow! Sounds familiar. In fact I distinctly recall a great blogger who wrote something along these very lines:

Where do you cross the line from an intelligent “macro hedge” into a “prop trade”?

For the life of me, I still do not know. Feel free to answer in comments!

UPDATE: Fixed Craig Pirrong’s name. Here is a relevant post; impossible to excerpt as too many points are right on the money so just RTWT.

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8 Responses to Suzy Khimm Gets It On “Prop Trading”

  1. joshua says:

    It is mind boggling simple. The trade is only a “bad” trade (aka “prop” trade or whatever the fancy words are) if the trader ends up making an obscene amount of money off it. “Obscene” is defined by the regulator as, “I’ll know it when I see it.”

    • I think you’re giving regulators’ responsiveness and perceptiveness way too much credit…I doubt they even know it when they see it ;-)

      • joshua says:

        I find your lack of faith in perfectly competent all-knowedlgeable incorruptible regulators (aka “technocrats”) disturbing.

  2. Hey, Charmer. Thanks for the mention, and the kind words. My only quibble is that there’s an “n” in my last name: Pirrong.

    • Apologies – fixed.

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