The Law and Economics of Hedge Fund Regulation: A Comparison between the U.S. and the EU

This doctoral dissertation seeks to assess and address the potential contribution of the hedge fund industry to financial instability. In so doing, the dissertation investigates three main questions. What are the contributions of hedge funds to financial instability? What is the optimal regulatory strategy to address the potential contribution of hedge funds to financial instability? And do new regulations in the U.S. and the EU address the contribution of hedge funds to financial instability? With respect to financial stability concerns, it is argued that despite their benefits, hedge funds can contribute to financial instability. Hedge funds’ size and leverage, their interconnectedness with Large Complex Financial Institutions (LCFIs), and the likelihood of herding behavior in the industry can potentially undermine financial stability. Nonetheless, the data on hedge funds’ size and leverage suggest that these features are far from being systemically important. In contrast, the empirical evidence on the interconnectedness of hedge funds with LCFIs and their herding behavior is mixed. Based on these findings, the thesis focuses on one particular aspect of hedge fund regulation: direct vs. indirect regulation. In this respect, a major contribution of the thesis to the literature consists in the explicit discussion of the relationships between hedge funds and other market participants. Specifically, the thesis locates the domain of the indirect regulation in the inter-linkages between hedge funds and prime brokers. Accordingly, the thesis argues that the indirect regulation is likely to address the contribution of hedge funds to systemic risk without compromising their benefits to financial markets. The thesis further conducts a comparative study of the regulatory responses to the potential contribution of hedge funds to financial instability through studying the EU Directive on Alternative Investment Fund Managers (AIFMD) and the hedge fund-related provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010.

Geological and Structural evolution of the Eurasia Africa plate boundary in the Gulf of Cadiz Central Eastern Atlantic Sea.

Iberia Africa plate boundary, cross, roughly W-E, connecting the eastern Atlantic Ocean from Azores triple junction to the Continental margin of Morocco. Relative movement between the two plate change along the boundary, from transtensive near the Azores archipelago, through trascurrent movement in the middle at the Gloria Fracture Zone, to transpressive in the Gulf of Cadiz area. This study presents the results of geophysical and geological analysis on the plate boundary area offshore Gibraltar. The main topic is to clarify the geodynamic evolution of this area from Oligocene to Quaternary. Recent studies have shown that the new plate boundary is represented by a 600 km long set of aligned, dextral trascurrent faults (the SWIM lineaments) connecting the Gloria fault to the Riff orogene. The western termination of these lineaments crosscuts the Gibraltar accretionary prism and seems to reach the Moroccan continental shelf. In the past two years newly acquired bathymetric data collected in the Moroccan offshore permit to enlighten the present position of the eastern portion of the plate boundary, previously thought to be a diffuse plate boundary. The plate boundary evolution, from the onset of compression in the Oligocene to the Late Pliocene activation of trascurrent structures, is not yet well constrained. The review of available seismics lines, gravity and bathymetric data, together with the analysis of new acquired bathymetric and high resolution seismic data offshore Morocco, allows to understand how the deformation acted at lithospheric scale under the compressive regime. Lithospheric folding in the area is suggested, and a new conceptual model is proposed for the propagation of the deformation acting in the brittle crust during this process. Our results show that lithospheric folding, both in oceanic and thinned continental crust, produced large wavelength synclines bounded by short wavelength, top thrust, anticlines. Two of these anticlines are located in the Gulf of Cadiz, and are represented by the Gorringe Ridge and Coral Patch seamounts. Lithospheric folding probably interacted with the Monchique – Madeira hotspot during the 72 Ma to Recent, NNE – SSW transit. Plume related volcanism is for the first time described on top of the Coral Patch seamount, where nine volcanoes are found by means of bathymetric data. 40Ar-39Ar age of 31.4±1.98 Ma are measured from one rock sample of one of these volcanoes. Analysis on biogenic samples show how the Coral Patch act as a starved offshore seamount since the Chattian. We proposed that compression stress formed lithospheric scale structures playing as a reserved lane for the upwelling of mantle material during the hotspot transit. The interaction between lithospheric folding and the hotspot emplacement can be also responsible for the irregularly spacing, and anomalous alignments, of individual islands and seamounts belonging to the Monchique - Madeira hotspot.