Comment from Ralph Saul

These comments respond to the request of the Financial Stability Oversight Council to assist in its study of formulating recommendations on the Volcker Rule. My comments are focused on Question 2, Question 4(x) and Question 9. These comments may also respond to other questions in the agency's notice, but they focus on these specific questions. The Dodd-Frank Act wisely prohibits banking entities from engaging in proprietary trading. Banking entities should not be permitted to use federal deposit insurance subsidies to engage in trading to benefit their self-interest. The most difficult question facing the FSOC is to define proprietary trading in a way which insures that market making activities do not exceed "the reasonably expected near term demands of clients, customers or counterparties." Our markets for securities and commodities are primarily designed around dealers and clients should be aware that their counterparties are dealers - not brokers - who have no fiduciary duty to their clients. This fact imposes upon banking entities the need to closely monitor what their tradinging desks are doing in servicing outside parties. An attempt by the FSOC to define permissible market making could result in either severly restricting that activity or conversely opening up the possibility of using market making as a guise for proprietary trading. My suggestion to the FSOC is to impose upon banking entities a requirement that they closely monitor their trading activities to insure that trades can be justified as legitimate market making. In this connection, the FSOC may want to llook at the techniques used by the NYSE in monitoring the old specialist system to insure that specialist dealer activities did not over-reach. But the responsibility for monitorying trading belongs with the banking entities subject to federal oversign.