Asia Risk 15: Derivatives regulators ask the wrong questions and get the wrong answers

Regulators globally are grappling with legislating the derivatives sector, but the first hurdle to overcome is to understand how exactly the industry works. Satyajit Das argues it is important to first come up with the correct definitions before providing the answers

Politicians and regulators globally are currently drafting laws to regulate derivatives. A common theme underlying the activity is an absence of knowledge of the true operation of the industry and the matters that need to be addressed. As the German writer Johann Wolfgang von Goethe observed: “There is nothing more frightening than ignorance in action.”

The author Thomas Pynchon warned: “If they can get you to ask the wrong questions then the answers don’t matter.” Simplistic causes and