The Corporations and Markets Advisory Committee has advised the Government that both the on-exchange and over-the-counter derivatives markets are appropriately regulated.In a report issued yesterday, it also advised that the current definition of derivatives in the Corporations Act was suitable and adequate.CAMAC's review was in response to Government concerns about the the role played by derivative markets in the financial crisis, particularly OTC products such as credit default swaps.A big concern was the perceived lack of transparency in these markets, which could lead to an unwillingness to trade in a falling market and so reduce market liquidity. Lack of transparency, combined with the complexity of the products, was seen to reduce the ability of regulators to identify the risks that could undermine market stability.CAMAC concluded that the current definition of a derivative in legislation "suitably aligns with market and regulatory perceptions of what constitutes a derivative."The Committee said that problems in applying concepts in the definition to less common financial arrangements could be dealt with through regulations, rather than seeking to redesign legislation to cater for uncommon situations.CAMAC said those regulatory powers already exist in legislation.CAMAC said: "Derivatives have a clearly recognised role in financial markets as risk management products. The ability of market participants to enter into on-exchange derivatives or customised OTC derivatives can be a key means of prudently managing business, operational or investment risk."