<div> <p>This paper analyzes the policy objective of fostering a domestic derivatives market and the design constraints that can undermine that goal. It focuses on rules that condition local derivatives activity on back-to-back hedging in external markets with strict matching requirements (same day execution and identical maturity), and explains how those constraints prevent risk management on a net portfolio basis. The paper argues that, while such rules may address monitoring concerns, they also fragment liquidity and create a “precaria” (fragile) form of market depth. It concludes that sustainable liquidity requires regulatory tolerance for portfolio hedging and a framework that allows intermediaries to manage exposure dynamically rather than transaction-by-transaction.</p> </div>