What role does regulation play in the derivatives market?

Regulation plays an important role in the derivatives market to ensure market transparency, stability, and protect investors. Since the financial crisis of 2008, regulatory bodies have tightened regulations on derivatives to prevent another financial crisis.

In India, the Securities and Exchange Board of India (SEBI) regulates the derivatives market. It has put in place various regulations related to trading, clearing, settlement, margin requirements, position limits, disclosures, and risk management to ensure the smooth functioning of the derivatives market. These regulations are aimed at promoting fair and transparent trading practices and protecting the interests of investors.