Adaptation dynamics of the quasispecies model

We study the adaptation dynamics of an initially maladapted population evolving via the elementary processes of mutation and selection. The evolution occurs on rugged fitness landscapes which are defined on the multi-dimensional genotypic space and have many local peaks separated by low fitness valleys. We mainly focus on the Eigen's model that describes the deterministic dynamics of an infinite number of self-replicating molecules. In the stationary state, for small mutation rates such a population forms a {\it quasispecies} which consists of the fittest genotype and its closely related mutants. The quasispecies dynamics on rugged fitness landscape follow a punctuated (or step-like) pattern in which a population jumps from a low fitness peak to a higher one, stays there for a considerable time before shifting the peak again and eventually reaches the global maximum of the fitness landscape. We calculate exactly several properties of this dynamical process within a simplified version of the quasispecies model.Comment: Proceedings of Statphys conference at IIT Guwahati, to be published in Praman

Institutionalization, Investment Adviser Regulation, and the Hedge Fund Problem

This Article contends that more effective regulation of investment advisers could be achieved by recognizing that the growth of hedge funds, private equity funds, and other private funds in recent decades is a manifestation of institutionalization in the investment advisory context. That is, investment advisers today commonly advise these “institutions,” which have supplanted other, smaller investors as advisory clients. However, the federal securities statute governing investment advisers, the Investment Advisers Act of 1940, does not address the role of private funds as institutions that now intermediate those smaller investors’ relationships to investment advisers. Consistent with that failure, investment adviser regulation regards a private fund, rather than the fund’s investors, as both the “client” of the fund’s adviser and the “thing” to which the adviser owes its obligations. The regulatory stance that the fund is the client, which recent financial regulatory reform did not change, renders the Advisers Act incoherent in its application to investment advisers managing private funds and, more importantly, thwarts the objective behind the Advisers Act: investor protection. This Article contends that policymakers’ focus should be trained primarily on the intermediated investors—those who place their capital in private funds—rather than on the funds themselves and proposes a new approach to investment adviser regulation. In particular, investment advisers to private funds should owe their regulatory obligations not only to the funds they manage but also to the investors in those funds

Investing and Pretending

This Article critically evaluates the CFTC\u27s “swap rules” and identifies the regulatory vision that they reflect. Based on that evaluation, it argues that the swap rules are grounded in a notable distinction between swaps and another financial market instrument--namely, securities. In particular, whereas “investing” is the hallmark of securities transactions, swap transactions fall under the rubric of “pretending,” a concept that this Article employs to elucidate the function and structure of swaps. Each party to a swap pretends that it holds either a long position or a short position in the reference asset, making payments to (or receiving payments from) the other party based on the performance of that position. Although the distinction between investing and pretending is vividly reflected in the CFTC\u27s approach to crafting the swap rules, this Article contends that the distinction is irrelevant for regulatory purposes. Moreover, the substantial regulatory costs arising from the CFTC\u27s pretense-based approach to swap regulation are likely to excessively hinder swap use, as firms seeking to mitigate risk turn to other types of hedging strategies in situations in which using swaps might otherwise be more socially beneficial. With the goal of efficient and coherent regulation in mind, this Article proposes that a substantially better approach to the CFTC\u27s swap rules would be to predicate them not on pretending, as the counterpoint to investing but, rather, on *1560 something that swap transactions and securities transactions have in common--and on which securities regulation, too, is based: the risks arising from speculation

Temporary Securities Regulation

In times of crisis, including during the 2020–2021 global pandemic, the U.S. Securities and Exchange Commission (SEC) has engaged in a type of securities regulation that few scholars have acknowledged, let alone evaluated. Specifically, during recent market crises, the SEC adopted rules that are temporary, designed to help the securities markets and their participants— both public companies and public investment funds, such as mutual funds and ETFs—weather the crisis at hand but go no further. Once that goal has been accomplished, these rules usually expire, replaced by the permanent rules that they temporarily supplanted. Although the temporary-rulemaking endeavor is laudable—and arguably necessary for the sake of maintaining well-functioning markets in times of crisis—neither the SEC nor its observers have sufficiently acknowledged the meaningful risks that temporary rules might present to investors. At the same time, they have not appreciated the opportunities that temporary rules may create for furthering the cause of more effective regulation. This Article seeks to illuminate the potential and the pitfalls of temporary rules, thereby contributing to a better understanding of what is at stake when the SEC adopts them and what considerations should inform the agency’s rulemaking during future crises

Institutionalization, Investment Adviser Regulation, and the Hedge Fund Problem

This Article contends that more effective regulation of investment advisers could be achieved by recognizing that the growth of hedge funds, private equity funds, and other private funds in recent decades is a manifestation of institutionalization in the investment advisory context. That is, investment advisers today commonly advise these “institutions,” which have supplanted other, smaller investors as advisory clients. However, the federal securities statute governing investment advisers, the Investment Advisers Act of 1940, does not address the role of private funds as institutions that now intermediate those smaller investors\u27 relationships to investment advisers. Consistent with that failure, investment adviser regulation regards a private fund, rather than the fund\u27s investors, as both the “client” of the fund\u27s adviser and the “thing” to which the adviser owes its obligations. The regulatory stance that the fund is the client, which recent financial regulatory reform did not change, renders the Advisers Act incoherent in its application to investment advisers managing private funds and, more importantly, thwarts the objective behind the Advisers Act: investor protection. This Article contends that policymakers\u27 focus should be trained primarily on the intermediated investors--those who place their capital in private funds--rather than on the funds themselves and proposes a new approach to investment adviser regulation. In particular, investment advisers to private funds should owe their regulatory obligations not only to the funds they manage but also to the investors in those funds

Uncertain Futures in Evolving Financial Markets

Today\u27s publicly offered investment funds, including mutual funds, have ever more diverse investment strategies, as they increasingly invest in financial instruments that, in earlier years, had been the province of only the most sophisticated investors. Although the new landscape of investment possibilities may substantially benefit retail investors, one financial instrument attracting increasing amounts of retail investors\u27 assets is acutely troublesome: the commodity futures contract. Futures originated as a means for farmers and other producers of agricultural commodities to ensure that their products could be sold at reasonable prices. Early on, the goals of futures regulation centered on one particular risk facing futures market participants—manipulative trading that destabilizes futures markets--with little emphasis on other risks, including risks to futures traders\u27 assets. Over the years, that goal has remained largely static. As this Article argues, that is the problem. The many retail investors that now participate (indirectly) in the futures markets are at risk as a result of the inadequate regulation of futures commission merchants (“FCMs”), the brokerage firms that are essential for futures transactions. “Inadequate” regulation in this context, moreover, means inadequate procedural regulation— regulation aimed at protecting assets that a brokerage customer deposits with a broker for purposes of carrying out her trading activities. The weaknesses of the procedural regulation of FCMs are evident in rules governing both FCMs\u27 operations and the liquidation of insolvent FCMs. And the deficiencies are more than theoretical, having become all-too-evident in the wake of two recent FCM bankruptcies. Proposing tailored policymaking solutions, this Article further contends that futures regulation can become substantially more effective—and do so in a cost-effective manner that need not excessively disrupt existing regulatory approaches. These proposals would not only help protect retail investors as they navigate new investment options; they would also help fortify the promising role that futures trading has begun to play in twenty-first century financial markets

The Other Securities Regulator: A Case Study in Regulatory Damage

Although the Securities and Exchange Commission is the primary securities regulator in the United States, the Department of Labor also engages in securities regulation. It does so by virtue of its authority to administer the Employee Retirement Income Security Act (ERISA), the statute that governs the investment of retirement assets. In 2016, the DOL used its securities regulatory authority to adopt a rule that, for the first time, designates securities brokers who provide investment advice to retirement investors as fiduciaries subject to ERISA\u27s stringent transaction prohibitions. The new rule\u27s objective is salutary, to be sure. However this Article shows that, by way of its reformation of many advisers\u27 relationships with their retirement-investor customers, the \u27fiduciary rule imperils retirement investors in ways that are not immediately evident and that other scholars have not noticed. First, the rule promotes a particular investment strategy—namely, passive investing—for all retirement investors, regardless of their individual needs or objectives. Second, as a thought experiment demonstrates, the rule portends a constriction of most retirement investors\u27participation in the securities markets and a still-wider gap, in terms of investment opportunities and performance, between these investors and their sophisticated counterparts. Despite these difficulties and speculation that the Trump administration would scuttle the rule, moreover the rule\u27s effects are likely enduring. Given the damage that the fiduciary rule threatens to inflict on retirement investors, the DOL\u27s adoption of it is an episode of failed rulemaking—one that, as this Article contends, may be traced to doctrinal factors: US. securities regulation is based on the notion that regulation should be neutral as among firms\u27 business and financial objectives and should harness, without necessarily abolishing, financial professionals\u27 conflicts of interest. Yet with its fiduciary rule, the DOL has effectively forsaken the principle of neutrality and deployed a scorched earth strategy against conflicts. With a view toward addressing the special concerns that shared regulatory authority creates, the Article delves into the lessons arising from this episode and how policymakers might better promote regulatory objectives and sound policy going forward