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Impact of the Volcker Rule on the Trading Revenue of Largest U.S. Trading Firms During the COVID-19 Crisis Period

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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.

Suggested Citation

  • Hulusi Inanoglu & David Lynch & Zach Modig, 2025. "Impact of the Volcker Rule on the Trading Revenue of Largest U.S. Trading Firms During the COVID-19 Crisis Period," Finance and Economics Discussion Series 2025-005, Board of Governors of the Federal Reserve System (U.S.).
    • Handle: RePEc:fip:fedgfe:2025-05
    DOI: 10.17016/FEDS.2025.005
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    File URL: https://www.federalreserve.gov/econres/feds/files/2025005pap.pdf
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    More about this item

    Keywords

    Bank Trading; Supervision and regulation of financial markets and institutions; Systemic Risk; Volcker Rule;
    All these keywords.

    JEL classification:

    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • G38 - Financial Economics - - Corporate Finance and Governance - - - Government Policy and Regulation
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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