The rule bars a banking entity from short-term trading for its own account, then carves out market making, underwriting, risk-mitigating hedging, and government securities. Because almost all bank trading can be described as one of those, the compliance burden fell on demonstrating that inventory was sized to reasonably expected near-term customer demand.
It reshaped dealer behaviour. Balance sheet committed to holding corporate bonds and less liquid instruments shrank, which many participants link to thinner depth in stress despite better capitalised banks.
Later amendments simplified the regime for smaller banks and loosened the fund restrictions. The core prohibition remains, enforced jointly by the federal-reserve, the occ-comptroller-of-the-currency, the sec and the cftc.
Related: dodd-frank-act, federal-reserve, occ-comptroller-of-the-currency, market-maker, liquidity