The FDIC appears ready to release the final proposals for the controversial Volcker Rule on October 11, according to the American Banker. 

Recall that the rule was designed to prevent banks holding FDIC-insured funds from making risky proprietary bets. The rule has already had a tremendous effect on the financial industry. Even before the final rules are set, many large banks have already wound down various prop trading units and sold off some alternative asset units--all in the name of the Volcker Rule. All the while, the exact definition of prop trading and the exemptions have been elusive.

But details have emerged. According to the American Banker, "The proposal would use a three-prong approach to define such an account. The first includes any account used by a firm to buy or take one or more several financial positions for the purpose of short-term resale; gain the benefit of short-term price movements; earn short-term arbitrage profits; or hedge one or more positions."

"There will be some exemptions. In the proposal, regulators outline certain requirements that must be met to ensure activities, revenues and other trading activities fall into those exempted categories. Additionally, the agencies added another exemption for risk-mitigating hedging. Like the other exceptions, banks must jump through certain hoops to ensure their activities are ‘truly' risk-mitigating hedging, including setting up an internal compliance program."

"The proposal also sets up exemptions for certain government obligations, trading on behalf of customers, trading by a regulated insurance company or trading by certain foreign bank entities. Other exemptions include transactions conducted by a banking entity as investment adviser, commodity trading advisor, trustee, or in a similar fiduciary capacity for the account of a customer where the customer, and not the banking entity, has beneficial ownership of the related position."

For more:
- here's the article

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