Q: What was the banks' argument?
A: They contended that a ban on proprietary trading could bar them from legitimate market-making on behalf of customers and from appropriately limiting their risks by hedging broader portfolios.
Q: But the final rule doesn't include such an exemption for "portfolio hedging." Why not?
A: An event in 2012 may have led regulators to rethink such an exemption. JPMorgan traders in London made huge trades on derivatives with the bank's money — an ill-conceived bet that cost the bank $6 billion. When the losses came to light, they damaged the bank's reputation. Experts believe the "London Whale" trades, as they became known, helped speed momentum toward a stricter rule. In its latest form, the rule does not exempt portfolio hedging.