This paper contributes to the discussion on the choice between governmental regulation and self-regulation of derivative markets (i.e., by financial exchanges) by analyzing in a comparative manner these two alternative regulatory mechanisms and by focusing on regulatory, instead of market, failures. Four types of failures are discussed in the case of governmental regulation: (1) the costs to run regulation bureaus, collect information and monitor the markets, (2) the credibility of the proposed mechanism, (3) rent seeking behavior by constituencies directly or indirectly affected by the regulation, and (4) constraints on financial innovation. Regarding self-regulation, three failures are discussed: (1) lack of competition between exchanges and alternative suppliers of derivative contracts, (2) agency problems in the organizational structure of the exchange, and (3) nonsocially optimal provision of goods. To illustrate this analysis, we contrast the regulation of derivative markets in the U.S. and Brazil. The former is as an example of strong governmental regulation, whereas the latter is an example of how self-regulation can function without strong governmental support (and, sometimes, with governmental actions that apparently run against market efficiency).