INSTITUTIONAL MECHANISMS FOR THE FUNCTIONING OF EXCHANGE TRADING IN DERIVATIVE CONTRACTS

Abstract

The article examines the institutional mechanisms governing exchange trading in derivative contracts as a strategic component of the modern financial infrastructure that ensures transparency, liquidity, and integration of the national capital market into the global financial system. It emphasizes that the effective functioning of the derivatives market relies on the interaction of formal and informal institutions, which balance market competition and state regulation. The content, structure, and key elements of the institutional environment of the derivatives market are analyzed, including the regulatory framework, infrastructural institutions, professional associations, and supervisory systems. Particular attention is given to the role of the central counterparty (CCP) as a key clearing mechanism that guarantees contract performance, reduces counterparty risks, and ensures centralized liquidity management.

The study generalizes international experience in organizing exchange trading of derivatives in the USA, the European Union, and the United Kingdom, where CCPs operate under EMIR and MiFID II directives. The European model is characterized by high levels of standardization, transparency, and reporting unification, creating favorable conditions for risk control and investor confidence. The paper also highlights risk management mechanisms - such as margining, default funds, and default waterfalls - that underpin the financial stability of clearing systems.

In the Ukrainian context, the research identifies several institutional limitations: fragmented regulation, absence of a CCP, and weak integration among trading, clearing, and depository institutions. The article substantiates the need to align national legislation with EU standards (EMIR, MiFID II), establish a national CCP, strengthen regulatory oversight, and introduce digital technologies (blockchain, smart contracts) in post-trade operations. Proposed directions for institutional development include legislative harmonization, digitalization of clearing processes, strengthening the institutional capacity of the National Securities and Stock Market Commission, and creating a unified information environment for clearing operations. Implementation of these measures will foster a competitive exchange infrastructure, mitigate systemic risks, enhance investor confidence, and support Ukraine’s integration into the European financial area.