A leaked copy of the final Volcker Rule shows regulators going in a direction that will put the big banks in a credit negative position, according to Moody’s Investors Service. The Volcker Rule was included in the sweeping financial reforms of the Dodd-Frank Act to prohibit banks from risking their own capital by engaging in the proprietary trading of securities, derivatives or high-risk financial instruments associated with private equity and hedge funds. A leaked copy of the final rule hit the marketplace last week, prompting Moody’s analyst Peter Nerby to forecast a few negative consequences for the bondholders of Bank of America (BAC), Citigroup (C), Goldman Sachs [[GS, JPMorgan Chase (JPM) and Morgan Stanley (MS). One of those consequences is that most market-making revenues at firms “can be viewed as customer-driven proprietary trading.” Restricting these activities on market-making and hedging will put bondholders in a credit negative position, Nerby said. “While we see the Volcker Rule’s restrictions on true proprietary trading, hedge fund and private equity investing as positive for bank bondholders, we see the Volcker Rule’s complex restrictions on market-making and hedging as credit negative for bank bondholders,” Nerby said. “The rule disadvantages the important core market-making franchises of the big U.S. banks and creates opportunities for unregulated competitors, such as high-frequency trading firms, and the non-U.S. operations of foreign banks,” he said. Moody’s criticized the rule for outlining a few principles while failing to implement “hard and fast guidelines.” Based on the guidelines included in the leaked rule, financial firms with gross trading assets and liabilities higher than $5 billion will be forced to provide somewhere between 17 to 22 separate data metrics to regulators each month. Write to Kerri Panchuk.