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Are Derivatives Regulated?

Robert Thorne • • 6 min read
Are Derivatives Regulated?
Some derivatives, such as commodity or stock futures, are regulated by the CFTC or SEC. Other derivatives related to interest rates, foreign exchange, and debt (called “financial derivatives”) are traded largely OTC among banks, whose operations are regulated by the Federal Reserve and other banking agencies.

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Herein, are OTC derivatives regulated?

In summary, the FMA Regulations govern the provision of securities services under the Financial Markets Act, 2012 (FMA) including in respect of over-the-counter derivatives (OTC derivatives).

Secondly, does the SEC regulate derivatives? SEC Proposes to Modernize Regulation of the Use of Derivatives by Registered Funds and Business Development Companies. However, derivatives, such as forwards, futures, swaps and written options, can also create future payment obligations.

Furthermore, who regulates OTC derivatives?

OTC derivatives reform in Europe is being conducted by the European Securities and Markets Authority (ESMA) under the name European Market Infrastructure Regulation, or "EMIR." On June 25, 2012, The issued its Draft Technical Standards for the Regulation on OTC Derivatives, CCPs and Trade Repositories.

Are derivatives assets or liabilities?

Derivative financial instruments are stated at their market value in the balance sheet and are classified as current assets or liabilities, unless they form part of a hedging relationship, where their classification follows the classification of the hedged financial asset or liability.

Related Question Answers

What are OTC derivatives?

Over-the-counter derivatives (OTC derivatives) are securities that are normally traded through a dealer network rather than a centralised exchange, such as the London Stock Exchange. This lack of a central exchange means that the parties to an OTC transaction are exposed to higher counterparty risk.

Are Futures OTC derivatives?

The most common underlying assets for derivatives are stocks, bonds, commodities, currencies, interest rates, and market indexes. Derivatives can trade over-the-counter (OTC) or on an exchange. OTC derivatives constitute a greater proportion of the derivatives market.
Robert Thorne
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Robert Thorne

Robert Thorne covers electric vehicle innovations, autonomous driving systems, global mobility trends, and automotive engineering developments.