Regulators on Tuesday released for public comment the Volcker rule proposal that will restrict Wall Street's ability to trade for its own profit, setting off what is expected to be a fierce lobbying campaign to weaken the crackdown.

Regulators are giving the public until January 13, 2012, to comment on the proposal. That is longer than expected, and could result in more pressure to change elements of the rule.

The proposal includes more than 350 questions that regulators want interested parties to weigh in on.

The Federal Reserve and other bank regulators acknowledged in the proposal that it will be challenging for the government to identify proprietary trading that will be banned under the rule.

It said drawing the line between prohibited and permitted trading often involves subtle distinctions that are difficult both to describe comprehensively within regulation and to evaluate in practice.

The Volcker rule, named after former Federal Reserve Chairman Paul Volcker, was tucked into last year's Dodd-Frank financial oversight law, designed to avoid a repeat of the 2007-2009 financial crisis.

The Volcker provision aims to prevent banks from recklessly engaging in risky trades by prohibiting them from short-term trading for their own profit in securities, derivatives and other financial products.

It will also prohibit banks from investing in, or sponsoring, hedge funds or private equity funds.

The law contains some exemptions to the ban for trades done to make markets for customers and for those trades used to hedge against certain risks.

Wall Street has feared that badly crafted exemptions will hurt market liquidity and place U.S. financial firms at a disadvantage.

The proposed rule has been noted as long, the issues are complex, so I think we made the right decision in allowing the full 90 days for comment, said John Walsh, acting director of the Office of the Comptroller of the Currency, which oversees the nation's largest banks.

Walsh spoke at a meeting of the Federal Deposit Insurance Corp's board on Tuesday which also agreed to put the proposal out for comment.

The Volcker rule proposal released by bank regulators on Tuesday is largely similar to a draft of the rule leaked last week that received a mixed reaction from industry groups.

The Securities Industry and Financial Markets Association, for instance, raised concerns about whether the exemption for trades intended to make markets for customers is too narrow.

A note released on Monday by Bernstein Research said, based on the draft, that the rule will have a very negative impact on the business models of fixed-income trading for Wall Street brokers. Bernstein estimates the impact could be 25 percent less in revenues.

The rule will have the most impact on large banks such as Goldman Sachs, Morgan Stanley and JPMorgan Chase.

Under the Dodd-Frank law, the Volcker rule goes into effect on July 21, 2012, but there is a two-year period for banks to comply with rule after this date.

(Reporting by Dave Clarke and Alexandra Alper; Editing by Andrea Ricci and Tim Dobbyn)