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yale program on financial stability case study 2014-2g-v1 december 1, 2014 revised: february 22, 2015 1 JPMorgan Chase London Whale G: Hedging Versus Proprietary Trading Arwin G. Zeissler 2 Andrew Metrick 3 Abstract In December 2013, the primary United States financial regulatory agencies jointly adopted final rules to implement Section 619 of the Dodd-Frank Wall Street Reform and Consumer Protection Act, which is often referred to as the “Volcker Rule”. Section 619 prohibits banks from engaging in activities considered to be particularly risky, including proprietary trading and owning hedge funds or private equity funds. Banking regulators designed the final rule against proprietary trading in part to prevent losses like the $6 billion London Whale loss that took place in 2012 at JPMorgan Chase. Given the controversial nature of the Volcker Rule, it is not surprising that the regulatory agencies received 18,000 comment letters, including a 67letter from JPMorgan Chase. _____________________________________________________________________ 1 This module is one of nine produced by the Yale Program on Financial Stability (YPFS) examining issues related to the JPMorgan Chase London Whale. The following are the other modules in this case series. • JPMorgan Chase London Whale A: Risky Business • JPMorgan Chase London Whale B: Derivatives Valuation • JPMorgan Chase London Whale C: Risk Limits, Met rics, and Models • JPMorgan Chase London Whale D: Risk Management Practices • JPMorgan Chase London Whale E: Supervisory Oversight • JPMorgan Chase London Whale F: Required Securities Disclosures • JPMorgan Chase London Whale H: Cross -Border Regulation • JPMorgan Chase London Whale Z: Background Overview 2 Project Editor, Case Study and Research, YPFS, Yale School of Management. The authors acknowledge helpful comments from K