Question

What is the role of regulatory authorities in derivative markets?

Hint:

SEBI ensures safety and stability in derivatives through strong surveillance and regulatory norms.

Answer 1

Regulatory authorities such as the Securities and Exchange Board of India (SEBI) play a vital role in ensuring smooth functioning, fairness, and transparency in the derivatives market. Roles and Responsibilities:

Regulation and Supervision: Establish rules for listing, trading, and settlement of derivatives.
Risk Management: Mandate margin requirements, position limits, and circuit breakers to control volatility.
Surveillance and Monitoring: Identify and prevent insider trading, market manipulation, and fraud.
Investor Protection: Promote investor awareness, dispute resolution, and ensure fair practices.
These measures help build investor confidence, increase liquidity, and promote a healthy financial market ecosystem.