Every cloud may have a silver lining. While bank stocks reel in response to the Volcker version of Glass Steagall, banks have the potential to price this year's unusually large amount of options low. If the stock price comes back, anyone for whom options constitute a significant proportion of their bonus should end up doing rather well.
By the end of the day yesterday Goldman Sachs was down 4.1%, Morgan Stanley was down 4.2%, JPMorgan was down 6.6% and Bank of America was down 6.2%.
Unfortunately, the favourable pricing option isn't open to everyone: JP Morgan already priced this year's options at market rate on Wednesday, since which time the stock has declined around 6%.
Morgan Stanley is also thought to have priced its options already. However, Goldman Sachs (which has delayed announcing bonuses until next week), and Bank of America, may be in with a chance of pricing favourably to take account of the new environment.
Of course, after a year in which banking stocks have risen from the grave there's no guarantee that bank stocks will come back to their recent highs (which is bad news for anyone with options priced at them).
Equally, however, there's a possibility that markets are overreacting to Obama's move. Goldman derives 'only' ~10% of total revenues from pure prop trading and the figure at other banks is likely to be a lot lower. John Carney at Clusterstock argues banks will be able to sidestep the legislation simply by allowing customers to participate in the internal hedge funds and private equity funds which are also banned under the new rules.