This Day On The Street
Continue to site
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Three ETFs To Be Impacted by FinReg

NEW YORK ( TheStreet) --After weeks of deliberation, Congress passed the final version of legislation for the first major overhaul of the nation's financial system since the Great Depression, imposing more restrictions on Wall Street and banks having a dramatic effect on stocks and exchange-traded funds which track the sector.

This final version will give the government new powers to break up companies that threaten the economy, create a new agency to guard consumers in their financial transactions and shine a light into shadow financial markets that escaped the oversight of regulators. To be more specific, the law will restrict banks from prop trading by limiting the amount an institution can invest in a hedge fund or private-equity fund to a maximum 3% of the bank's capital. Companies most likely to be influenced by this regulation include big players like JP Morgan Chase (JPM - Get Report), Goldman Sachs (GS - Get Report), Bank Of America (BAC - Get Report), Wells Fargo (WFC - Get Report) and Morgan Stanley (MS - Get Report).

Another facet of a tighter leash on large financial companies comes from the comprehensive regulation to the over-the-counter markets. With the new law, routine derivatives will have to be traded on exchanges or other electronic systems and routed through clearinghouses, which will increase transaction costs. Additionally, banks who participate in derivatives trading are going to be required to turn their derivatives trading operations into affiliates.

A third artery of the new law includes an increase in the deposit-insurance fee paid by banks to the Federal Deposit Insurance Corp., eating away at cash that can be used to generate revenue. In addition to this increase, the new law requires banks that package loans to keep 5% of the credit risk on their balance sheets and allow regulators to exempt certain "low-risk" mortgages from this requirement.

Lastly, the new law revamps the credit-rating industry which allows investors to sue credit-rating firms for "knowing or reckless" failure and gives the Securities and Exchange Commission the power to deregister a firm that gives too many bad ratings over time.

In a nutshell, the new law is expected to expand consumer protection and clamp down on lending practices and may be beneficial to the average consumer. However, it is likely to have a negative impact on revenue generation and the overall bottom line of the large financial institutions.
1 of 2

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Real Money

More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

Product Features:
  • Access to Jim Cramer's daily blog
  • Intraday commentary and news
  • Real-time trading forums
Only $49.95
14-Days Free
14-Days Free
IYG $86.02 -1.32%
XLF $23.45 -1.00%
VFH $47.92 -1.10%
BAC $14.80 -1.50%
GS $164.50 -1.40%


Chart of I:DJI
DOW 17,830.76 -210.79 -1.17%
S&P 500 2,075.81 -19.34 -0.92%
NASDAQ 4,805.2910 -57.85 -1.19%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs