WASHINGTON (Reuters) - A draft proposal of the Volcker rule that cracks down on banks' proprietary trading gives firms flexibility to hedge risk, and sets stringent limits on such trading beyond U.S. borders to address fears the rule will put U.S. firms at a disadvantage.
The draft posted online by The American Banker publication and widely circulated by the financial industry on Wednesday also contained an exemption for market makers, but an industry group immediately said it was concerned the exemption may not be broad enough.
The Volcker rule, named after former Federal Reserve Chairman Paul Volcker, is part of last year's Dodd-Frank financial oversight law, designed to avoid a repeat of the 2007-2009 financial crisis.
It aims to prevent banks from recklessly engaging in risky trades by prohibiting them from trading for their own profit in securities, derivatives and certain other financial instruments.
It will also prohibit banks from investing in, or sponsoring,
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