The finance ministry is planning to bring trading in commodity derivatives under the purview of the Securities and Exchange Board of India. It plans to merge the functions of the Forward Markets Commission and the capital market watchdog.

Ministry sources said there was currently a debate on how to converge the functions of the regulators.

The ministry of consumer affairs, food and public distribution constituted a task force last week to analyse the existing divergences and chart a path of convergence, if possible.

The idea of converging markets, regulation, institutions and players was proposed by Finance Minister Jaswant Singh in a recent communication to the Minister for Consumer Affairs, Food and Public Distribution Sharad Yadav.

Earlier, the finance ministry had proposed that share brokers should be allowed to trade in commodities.

The introduction of derivatives trading in the securities market means most of its infrastructure and skills can be used by the commodity derivatives market and they can work together. There is also a proposal to use regional stock exchanges for trading in commodity derivatives.

The Forward Markets Commission does not enjoy autonomous status like Sebi. The proposal to empower it has been lying with the ministries concerned for more than two years now.

Since the national commodities exchanges were in the process of kicking off derivatives trading in almost all commodities, and a proposal to allow securities brokers to trade on commodity exchanges was being worked out, the need for a regulator with more power was urgently felt, officials said.

While the terms of reference of the task force have not yet been charted out, the first meeting will be held soon.

The task force is to be chaired by the secretary, department of consumer affairs, and will include the chief economic adviser in the finance ministry, the senior economic adviser in the department of consumer affairs, the chairman or a senior representative of Sebi and a member of the Forward Markets Commission as members.

Future option

• FMC does not enjoy autonomy like Sebi.
• The idea of converging the markets regulation, institutions and players was proposed by the finance minister.
• Debate is on on how to converge the functions of the regulators.
• There is also a proposal to use the trading platform of regional bourses for commodity derivatives trading.