The finance ministry, sources said, wants regulators to be proactive to prevent systemic risks arising out of derivatives trade in the country.
Currently, derivatives fall under the ambits of RBI, Sebi and Forward Markets Commission (FMC). While the interest rate, foreign currency and credit derivatives in the over-the-counter (OTC or those traded without going through an exchange) market is regulated by the RBI, Sebi regulates exchange traded equity derivatives market and FMC has the jurisdiction over the exchange-traded commodity derivatives market. The exchange-traded interest rate futures and foreign currency derivatives are regulated by both Sebi and RBI.
The ministry feels that while the communication between the RBI and other regulators was "satisfactory", inter-regulatory coordination among Sebi, FMC, Irda and PFRDA needs to be strengthened to prevent systemic risks, the sources said.
The focus on derivatives also stems from the recommendations of the Financial Sector Legislative Reforms Commission (FSLRC).
The ministry is keen to ensure that the FSDC is converted into a "war room" to cushion the country from possible impact of global financial crisis like the one in 2008 and help in tackling systemic risks.
The FSLRC had proposed that a Unified Financial Agency would take charge of regulating organised financial trading from the RBI in the areas connected with the bond-currency-derivatives nexus and from FMC for commodity futures. This, the FSLRC said, would result in unification of organised financial trading, including equities, government bonds, currencies, commodity futures and corporate bonds.
The ministry sources said while the setting up of such a unified financial agency would take time, in the interim period coordination between RBI, Sebi and FMC should be strengthened. Also in the backdrop of recent the settlement crisis at the NSEL, the FSDC will also discuss the need to look at the linkages between financial sector markets and commodity derivatives market to prevent possible systemic risks in the future, they said.
Incidentally, a high-level committee headed by the economic affairs secretary Arvind Mayaram had reportedly found "minor systemic failure" in the Rs 5,600-crore settlement crisis, involving NSEL, following which the government wanted to eliminate the regulatory loopholes in the commodity market norms and make it as stringent and efficient as the capital market norms. the government is also considering a proposal to merge FMC with Sebi, for which the Sebi Act has to be amended.