Bank of America Merrill Lynch is laying off 20 to 30 proprietary traders - because of the Volcker Rule, and not necessarily the market slowdown.  The firm says the provision in the Dodd-Frank Reform Act puts severe restrictions on the ability of banks to make bets with their own money - i.e., prop trading.

Today's layoffs account for about 1/3 of BofA's prop team, with positions eliminated in New York, London, Hong Kong and elsewhere.  One bank executive emphasized that the cuts had nothing to do with performance, and that the unit has been solidly profitable.  Many of the laid-off traders specialized in more liquid instruments - securities that are easier to sell, thereby making it easier to close out positions.  The head of the prop trading unit, David Sobotka, was not among those let go by Bank of America.

The impact of the proprietary trading rule, along with a steep drop in trading, has taken its toll on the larger firms where proprietary trading had been a hugely profitable business.  One by one, like Bank of America, they all decide on their next steps - (i) sell their prop trading businesses;  (ii)  transfer traders to other units;  or, (iii) simply shut down the desks.  [NYT Dealbook, 9/29]