U.S. regulators should scrap a proposal on the Volcker rule that curbs banks' speculative bets, and work on a fresh one that does not threaten the health of markets, a member of the U.S. Securities and Exchange Commission said on Friday.

There is a considerable risk that as proposed, the regulatory infrastructure to implement the Volcker rule could unduly impede the competitiveness... of our financial markets and hinder the flow of capital, said Republican SEC Commissioner Troy Paredes during a speech at the Practising Law Institute's annual SEC Speaks conference.

The 2010 Dodd-Frank financial oversight law requires regulators to draft the Volcker rule, named after former Federal Reserve Chairman Paul Volcker.

The proposal bans banks from proprietary trading and limits their investments in hedge funds.

The idea is that financial institutions that receive government backstops, like deposit insurance, should not be allowed to make risky bets with their own money.

Regulators, including the SEC, unveiled their proposal in October. It was roughly 300 pages, with more than 350 questions for public comment, indicating the final version could look significantly different.

The financial community complained that it was too complex and too vague, especially for a reform set to go live in July of this year.

My present view is that the most appropriate path forward from here would be a reproposal - a fresh start, if you will, Paredes said.

Regulators have struggled to ensure that the ban on proprietary trades doesn't also capture trades that banks make for their customers' benefit in a market making capacity.

Industry trade groups and big banks affected by the rule, such as Goldman Sachs, have in recent weeks bombarded regulators with comments, most of which were opposed to the proposal.

Regulators are now combing through the responses to determine their next steps, which could include either adopting the rule or crafting a new one to put out for public comment again.

(Reporting By Sarah N. Lynch; Editing by Gerald E. McCormick and Tim Dobbyn)