Private Governance of Financial Markets: the US Regulatory Regime on Hedge Funds

The article investigates the private governance of financial markets by looking at the evolution of the regulatory debate on hedge funds in the US market. It starts from the premise that the privatization of regulation is always the result of a political decision and analyzes how this decision came about and was implemented in the case of hedge funds. The starting point is the failure of two initiatives on hedge funds that US regulators launched between 1999 an 2004, which the analysis explains by elaborating the concept of self-capture. Facing a trade off between the need to tackle publicly demonized issues and the difficulty of monitoring increasingly sophisticated and powerful private markets, regulators purposefully designed initiatives that were not meant to succeed, that is, they “self-captured” their own activity. By formulating initiatives that were inherently flawed, regulators saved their public role and at the same time paved the way for the privatization of hedge fund regulation. This explanation identifies a link between the failure of public initiatives and the success of private ones. It illustrates a specific case of formation of private authority in financial markets that points to a more general practice emerging in the regulation of finance.

Markets and linguistic diversity

The choice of language is a crucial decision for firms competing in cultural goods and media markets with a bilingual or multilingual consumer base. To the extent that multilingual consumers have preferences over the intrinsic characteristics (content) as well as over the language of the product, we can examine the efficiency of market outcomes regarding linguistic diversity. In this paper, I extend the spokes model and introduce language as an additional dimension of product differentiation. I show that: (i) if firms supply their product in a single language (the adoption model) then the degree of linguistic diversity is inefficiently low, and (ii) if some firms supply more than one linguistic version (the translation model) then in principle the market outcome may exhibit insufficient or excessive linguistic diversity. However, excessive diversity is associated to markets where the fraction of products in the minority language is disproportionately high with respect to the relative size of the linguistic minority.

Manipulability in matching markets: conflict and coincidence of interests

We study comparative statics of manipulations by women in the men-proposing deferred acceptance mechanism in the two-sided one-to-one marriage market. We prove that if a group of women employs truncation strategies or weakly successfully manipulates, then all other women weakly benefit and all men are weakly harmed. We show that our results do not appropriately generalize to the many-to-one college admissions model.

Synaptobrevin N-terminally bound to syntaxin-SNAP-25 defines the primed vesicle state in regulated exocytosis.

Rapid neurotransmitter release depends on the ability to arrest the SNAP receptor (SNARE)-dependent exocytosis pathway at an intermediate "cocked" state, from which fusion can be triggered by Ca(2+). It is not clear whether this state includes assembly of synaptobrevin (the vesicle membrane SNARE) to the syntaxin-SNAP-25 (target membrane SNAREs) acceptor complex or whether the reaction is arrested upstream of that step. In this study, by a combination of in vitro biophysical measurements and time-resolved exocytosis measurements in adrenal chromaffin cells, we find that mutations of the N-terminal interaction layers of the SNARE bundle inhibit assembly in vitro and vesicle priming in vivo without detectable changes in triggering speed or fusion pore properties. In contrast, mutations in the last C-terminal layer decrease triggering speed and fusion pore duration. Between the two domains, we identify a region exquisitely sensitive to mutation, possibly constituting a switch. Our data are consistent with a model in which the N terminus of the SNARE complex assembles during vesicle priming, followed by Ca(2+)-triggered C-terminal assembly and membrane fusion.

Regulated expression of GLUT2 in diabetes studied in transplanted pancreatic beta cells.

GLUT2 disappearance is a marker of the beta cell glucose-unresponsiveness associated with diabetes. Understanding the factor(s) leading to this dysfunction may shed light on pathogenesis of diabetes. Since the regulation of GLUT2 expression in diabetes can so far only be studied in in vivo experiments, we developed a novel experimental approach to study the genetic regulation of GLUT2 in diabetes. By encapsulating islets or cell lines in semi-permeable membranes, these cells can be exposed to the diabetic environment of rats or mice and can be retrieved for analysis of GLUT2 expression and for the change in the secretory response to glucose. Immunocytochemical analysis of transporter expression reveals changes in protein expression while transcriptional analysis of GLUT2 gene expression could be performed in cells transfected with promoter-reporter gene constructs. Using this last approach we hope to be able to characterize the promoter regions involved in the beta cell- and diabetes-specific regulation of GLUT2 expression and possibly to determine which factors are responsible for this regulation.

Product differentiation, competitive pressure and the effects of innovation on the success and survivability of firms in oligopoly markets

In a recent paper Tishler and Milstein (2009) fi…nd that increased competition may increase aggregate R&D spending while market output decreases. Therefore, they obtain the surprising result that R&D spending is excessive when competition becomes intense. Their result is based on the standard linear demand function for differentiated products introduced by Bowley (1924) where decreased product differentiation is interpreted as more competitive pressure. In this paper I show that at an aggregate level this interpretation is problematic because equilibrium effects are dominated by a demand reduction effect. A slight modifi…cation of the standard demand function eliminates this effect. For the Tishler and Milstein (2009) setting it is shown that then increased competition increases both R&D spending and aggregate market output. Therefore, at least for consumers, more intense competition increases welfare. Journal of Economic Literature Classi…fication Numbers: D43, L1, O3. Keywords: Oligopoly markets, Product differentiation, Competitive pressure.

Optimal coexistence of long-term and short-term contracts in labor Markets

We consider a market where firms hire workers to run their projects and such projects differ in profitability. At any period, each firm needs two workers to successfully run its project: a junior agent, with no specific skills, and a senior worker, whose effort is not verifiable. Senior workers differ in ability and their competence is revealed after they have worked as juniors in the market. We study the length of the contractual relationships between firms and workers in an environment where the matching between firms and workers is the result of market interaction. We show that, despite in a one-firm-one-worker set-up long-term contracts are the optimal choice for firms, market forces often induce firms to use short-term contracts. Unless the market only consists of firms with very profitable projects, firms operating highly profitable projects offer short-term contracts to ensure the service of high-ability workers and those with less lucrative projects also use short-term contracts to save on the junior workers' wage. Intermediate firms may (or may not) hire workers through long-term contracts.

Sex differences in nuclear receptor-regulated liver metabolic pathways.

Liver metabolism is markedly sex-dimorphic; accordingly, the prevalence of liver diseases is different between sexes. The superfamily of nuclear receptors (NRs) governs the proper expression of key liver metabolism genes by sensing lipid-soluble hormones and dietary lipids. When the expression of those genes is deregulated, disease development is favored. However, we lack a comprehensive picture of the differences between NR actions in males and females. Here, we reviewed explorative studies that assessed NR functions in both sexes, and we propose a first map of sex-dimorphic NR expression in the liver. Our analysis suggested that NRs in the female liver exhibited cross-talk with more liver-protective potential than NRs in male liver. This study provides empirical support to the hypothesis that women are more resilient to some liver diseases than men, based on a more compensative NR network. This article is part of a Special Issue entitled: Translating nuclear receptors from health to disease.

The degradation of HFR1, a putative bHLH class transcription factor involved in light signaling, is regulated by phosphorylation and requires COP1.

All developmental transitions throughout the life cycle of a plant are influenced by light. In Arabidopsis, multiple photoreceptors including the UV-A/blue-sensing cryptochromes (cry1-2) and the red/far-red responsive phytochromes (phyA-E) monitor the ambient light conditions. Light-regulated protein stability is a major control point of photomorphogenesis. The ubiquitin E3 ligase COP1 (constitutively photomorphogenic 1) regulates the stability of several light-signaling components. HFR1 (long hypocotyl in far-red light) is a putative transcription factor with a bHLH domain acting downstream of both phyA and the cryptochromes. HFR1 is closely related to PIF1, PIF3, and PIF4 (phytochrome interacting factor 1, 3 and 4), but in contrast to the latter three, there is no evidence for a direct interaction between HFR1 and the phytochromes. Here, we show that the protein abundance of HFR1 is tightly controlled by light. HFR1 is an unstable phosphoprotein, particularly in the dark. The proteasome and COP1 are required in vivo to degrade phosphorylated HFR1. In addition, HFR1 can interact with COP1, consistent with the idea of COP1 directly mediating HFR1 degradation. We identify a domain, conserved among several bHLH class proteins involved in light signaling , as a determinant of HFR1 stability. Our physiological experiments indicate that the control of HFR1 protein abundance is important for a normal de-etiolation response.