Regulation of derivatives is covered by the Dodd-Frank Act where trades have special collateral and margin.
Past regulation did not work satisfactorily for Washington; then there was little regulation, nor collateral required. However, independent studies have shown that they had little to do with the 2008/2009 financial meltdown.
Derivatives are essential to trading of securities for any orderly financial securities market. Derivatives are financial instruments derived from other assets. instead of trading that asset itself. One basic example is a futures contract, an agreement to exchange an underlying asset at a future date.
Derivatives are leveraged, so that a small movement in the underlying value can cause a large difference in the value of the derivative.
They can be used to speculate for profit or to hedge in order to reduce risk in that underlying asset.
These bureaucratic regulatory efforts are actually too binding to be effective. (See the Earl J Weinreb NewsHole® comments.)
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