IDEAS home Printed from https://ideas.repec.org/a/pal/jbkreg/v14y2013i1p61-79.html
   My bibliography  Save this article

The reason for the regulation of contracts for difference and its impact on hedge fund activism

Author

Listed:
  • Christian Alexander Mecklenburg-Guzmán

Abstract

The Financial Service Authority (FSA) introduced a new regime requiring the disclosure of synthetic holdings equally to shares with effect of September 2009. The disclosure of shares assists identifying dominant investors; however, the disclosure of synthetic holdings does not serve the same purpose and therefore logic suggests that the new regime does not satisfy the rationale of shareholder disclosure. The motivation of current research is to analyse the implications of this regime. It generates extensive costs which has inevitably detrimental effects on the UK financial market. The focus of this research will be on hedge funds engaging in the influence of companies, so-called activist hedge funds, for which the negative effect is most evident. The approach is as follows. First existing alternatives under the market abuse regime (MAR) will be analysed which ought to govern misconducts by exploring relevant cases. Second, it will be investigated whether the new regime is market or regulator induced. For this purpose a collection of market responses will be analysed which are representative for the market concern. Second, a literature review on the regulators framework will be conducted to investigate the reliability of FSA's argumentation on the raison d’être of the regime. In addition, guidance on the disclosure of financial instruments will be scrutinised inter alia in a comparative study. The findings suggest that base for the current regime is faulty and the costs exceed the benefits. It will be recommended that the regime needs revision and should approximate the US regime.

Suggested Citation

  • Christian Alexander Mecklenburg-Guzmán, 2013. "The reason for the regulation of contracts for difference and its impact on hedge fund activism," Journal of Banking Regulation, Palgrave Macmillan, vol. 14(1), pages 61-79, January.
  • Handle: RePEc:pal:jbkreg:v:14:y:2013:i:1:p:61-79
    as

    Download full text from publisher

    File URL: http://www.palgrave-journals.com/jbr/journal/v14/n1/pdf/jbr20121a.pdf
    File Function: Link to full text PDF
    Download Restriction: Access to full text is restricted to subscribers.

    File URL: http://www.palgrave-journals.com/jbr/journal/v14/n1/full/jbr20121a.html
    File Function: Link to full text HTML
    Download Restriction: Access to full text is restricted to subscribers.
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:pal:jbkreg:v:14:y:2013:i:1:p:61-79. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Sonal Shukla or Springer Nature Abstracting and Indexing (email available below). General contact details of provider: http://www.palgrave-journals.com/ .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.