The US Commodity Futures Trading Commission (CFTC) has prevented exchange operator CME Group from listing as early as this week a first-of-its-kind contract that would have allowed crude futures to trade around the clock.
CME on Wednesday sought to "self-certify" the listing of the new 24/7 crude contract, using a fast-tracked listing process that could have allowed trading to begin as soon as Friday. The CFTC on Thursday said it was using its authority to stay the listing until it can conduct a "thorough review" to determine if it complies with federal law and its own regulations.
The CFTC last month opened public comment on the idea of around-the-clock trading of energy, and that comment period remains open.
"CME's decision to disregard the commission's effort to undertake a reasoned analysis of the critical issues at stake is wholly inappropriate and necessitates commission action to stay the certification," CFTC chairman Michael Selig said. "The commission encourages exchanges to work with agency staff to address potential legal issues before seeking to list novel contracts."
The CFTC rarely stays self-certification. Under that process, an exchange will detail a new product's rules to the agency and self-certify the product complies with federal law and the agency's regulations. Unless the agency acts to block a listing, an exchange could list a self-certified product within just one business day.
CME last month announced it was preparing to allow 24/7 trading of a new WTI crude futures contract on 30 August. If listed, the new contract — equivalent to 10 bl of crude — would become the first 24/7 energy futures contract available in the US, giving traders the ability to buy and sell futures at night and over the weekends. Since the US-Iran war began in late February, attacks on infrastructure and shipping in the Mideast Gulf have frequently taken place over the weekend when futures markets are closed.
Although CME asked to self-certify the 24/7 crude contract, it also separately asked to list the new product through a voluntary review and approval process called "section 40.3". That process will give the CFTC a 45-day review period it can then extend by an additional 45 days for products it determines raise "novel or complex issues".
"We work with the commission on their review of any new product," CME said.
The CFTC's action to halt the listing comes after oil industry executives and commodity trading firms held at least nine meetings with Selig over the last two weeks to discuss "concerns" about 24/7 energy trading, according to meeting records made public on Tuesday.
The CFTC, in a request for comments that remains open through 27 July, asked whether allowing 24/7 oil trading could result in higher volatility during thinly traded off hours, potentially triggering collateral demands or forced liquidation.
