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Volcker Rule May Cut Fixed-Income Revenue 25%, Hintz Says

Wall Street’s fixed-income desks could suffer a 25 percent decline in revenue under a Volcker rule proposal that may outlaw so-called flow trading, according to brokerage analyst Brad Hintz.

The draft proposal, written by regulators including the Board of Governors of the Federal Reserve System and the Federal Deposit Insurance Corp., forbids market-makers who trade debt securities for customers from amassing positions “in expectation of future price appreciation,” Hintz, of Sanford C. Bernstein & Co., wrote today in a note to investors. “Thus flow trading may be prohibited.” Such a move would cut fixed-income revenue by 25 percent and reduce profit margins by 18 percent, Hintz estimated.