Regulatory and Industry Initiatives

Abstract

Regulation in the derivatives market has evolved steadily over the past three decades through the efforts of national/supranational supervisors, self-regulatory organizations, and financial intermediaries. The process has developed gradually, in response to the natural evolution of the market and the problems that periodically appear. Regulation of derivatives takes two forms: formal regulation through supervisory agencies and self-regulation through market and industry discipline. Both are ultimately necessary to ensure a safe and controlled operating environment and reinforce the governance efforts we have outlined in Chapter 3. When appropriate regulatory processes (and associated legal protections) exist, governance can be truly effective. In this chapter we consider important initiatives and advances that have taken place in both sectors in recent years.