WASHINGTON — The big question following JPMorgan Chase & Co.'s now-notorious derivative trade is whether it would have been permitted under the so-called 'Volcker Rule.' But the answer is clear cut to an advocacy group that has led calls for regulatory restrictions after the 2008 crisis.

In a conference call with reporters Friday, Americans for Financial Reform argued — counter to claims by the Wall Street giant — that the trades by the firm's London investment office resulting in at least $2 billion in losses is exactly the type of transaction that former Federal Reserve Chairman Paul Volcker's proposal was meant to stop. His idea, which bans commercial banks from proprietary trading, was enacted in the Dodd-Frank Act.

"That investment office was sold to regulators as a hedging operation, but what it in fact was was an in-house hedge fund," said Marcus Stanley, the policy director for Americans for Financial Reform. "What that fund was doing was running speculative spread trades that were absolutely designed to generate a profit. We know with certainty that JPMorgan was lobbying the regulators to be allowed to continue precisely these trades … under the Volcker Rule."

But whether JPMorgan Chase and other big banks will be able to continue such trades is ultimately up to U.S. bank regulators that are implementing the Dodd-Frank provision. Their regulatory proposal had indicated that institutions would still be able to carry out certain hedging and market-making transactions not considered the kind of risky trading targeted by the Volcker Rule.

Stanley said the regulators' final rule should firmly make clear that trades like that at the heart of JPMorgan Chase's big loss are not part of the exemption.

"It's very important that the regulators finalize a Volcker Rule that will not permit this," he said. "In fact, that should be fairly straightforward for them to do because there are … many, many differences between a speculative trade designed to generate profits, as this one was, and a true risk-reducing hedge."

In a shareholder meeting Tuesday, JPMorgan Chase chief executive Jamie Dimon indicated the bank agrees the London trades ran afoul of hedging.

"We continue to believe in the importance of being able to hedge risk as an institution. However, we also understand the need for rules and practices that ensure that hedging doesn't morph into something different," he said. "What this hedge morphed into violates our own principles in terms of complexity and risk."