The role that the US plays in dictating the economic and financial actions of the rest of the world is quite remarkable, and for anyone who doubts that this is the case, they will merely need to take a look at the actions of the eurozone countries in the coming months as they look to reform their own economic systems.

With the Senate passing President Obama’s financial reform package, it seems that a bill is closer than ever and some even expect it to be signed into law before July 4th. Whilst the Senate version of the bill needs to reconciled with the House version, the majority of the work appears to be done.

President Obama’s reforms immediately had an impact on the Dow Jones, with an enormous sell off sparking on Wall Street. The President would have known that this was going to happen, and really the markets should have already priced these reforms into their instrument values, but it seems they didn’t.

Accordingly, most European indexes plummeted as well, although there are a myriad of reasons why this is the case, not least Angela Merkel’s promise to ban short selling on the German markets. Merkel’s decision is just the end of a first round of attempts at reforms which also saw European hedge funds get a kicking, now that the US has provided a blueprint on how reforms could look, the second round might prove to be a lot more comprehensive.

The problem that the rest of the world has is that President Obama’s reforms almost have to be enacted everywhere else, regardless of whether they actually work as they’re supposed to do or not. Banking is truly global, a number of UK based firms have huge interests in the United States because it is such a huge market. If the decision is that the reforms are really troublesome to banks they are either faced with pulling out of America to some degree (not financially rewarding) and putting a lot of efforts elsewhere (dangerous for the country that hosts it, as demonstrated by the UK’s struggles with having a financial sector that is simply too large) or staying put and trying to make the best of a bad hand. At the same time this decision makes it likely the banks will put up with the reforms, and that other countries will enact similar ones.

Type of companies that deal with spread betting view times of market volatility as times when they see the most traders, particularly when, as in the case of the reforms being passed, it was so obvious what the market was going to do. With the US taking the lead on banking reform, it’s only a matter of time before the others follow suit, with obvious implications for indexes and share prices in those markets, so if you keep a close eye on legislative developments you can make sure that you’re in the right place at the right time.