Proprietary trading is often restricted under which regulation?

Proprietary trading is primarily restricted under the Volcker Rule, which was enacted as part of the Dodd-Frank Wall Street Reform and Consumer Protection Act. The Volcker Rule specifically addresses the risks associated with proprietary trading by banks and financial institutions. Its aim is to prevent these entities from taking excessive risks with their own capital, which could potentially lead to systemic risks within the financial system.

Under the Volcker Rule, banks are prohibited from engaging in proprietary trading, which involves trading financial instruments for their own profit rather than on behalf of clients. This regulation is designed to ensure that banks focus on traditional lending and investment activities rather than speculative trading, thereby helping to stabilize the financial system and protect consumer deposits.

The Dodd-Frank Act encompasses a broader range of financial regulations, including the Volcker Rule, but it is the specific application of the Volcker Rule that directly limits proprietary trading practices. Other regulations listed, such as the Investment Company Act and the Securities Exchange Act, do not focus primarily on prohibiting proprietary trading by banking institutions in the same manner as the Volcker Rule does.