Despite scaling back their prop desks in anticipation of Volcker, Wall Street banks, operating globally, still make a lot of money trading for their own account. And arguably the temptation of those yachts may have encouraged their traders to take positions against their customers, or at best front run advice. Whether that happens or not, operating prop desks is hardly a practice that encourages the belief that customers come first.
But Paul Volcker, the architect of the legislation, is less concerned about such matters than the temptation for enormous risk-taking that can lead to huge losses that potentially destabilise the entire financial system. Big bets on things like mortgage derivatives were, after all, what got banks into trouble in the first place in 2007.
Banks, unsurprisingly, disagree, and the objections of their lawyers and lobbyists over the last few years has meant that Volcker's simple, sensible idea has morphed into a gargantuan piece of legislation that many argue can't possibly be implemented, because drawing a line between prop trading for the bank's benefit and market making or hedging for the customer's benefit is impossible in today's complex trading environments. Banks will easily find their way around the rule, it is said, and little will really change.
We at the IC have had our own Volcker-style rule for some time, of course - in short, we're prohibited from invest or trade in a way which may impinge upon the recommendations we offer our readers. It's a perfectly reasonable way to avoid conflicts of interest, and we apply it without any thought to profits we may miss out on.
That said, looking back at some of the ideas we've put forward this year has been somewhat frustrating, because were we able to trade our own book we'd be doing very nicely, thank you. Barring any last-minute disaster our 2013 Tips of the Year will have outperformed the All-share more than two-fold, up an impressive 33 per cent so far. What's more, Simon Thompson's bargain shares portfolio is 18 percentage points ahead of its benchmark, and our quantitative screening strategies are creating hefty alpha, too.
We're actually now in the process of putting together our Tips for 2014 - which you'll be able to pick up in the 3rd January issue - and also our featured-packed Christmas double issue, which comes out on 20th December. It all makes for an exhausting production schedule, but the thought of our customers relaxing on their yachts makes it worth the effort.
