NGFA Opposes All-Day Futures Trading

MT. JULIET, Tenn. (DTN) -- The National Grain and Feed Association said expanding futures trading hours, potentially to 24 hours a day, seven days per week, would dilute market liquidity, create staffing and compliance burdens, and generate a disconnect between cash and futures markets in comments submitted to the Commodity Futures Trading Commission.

"Our members have been clear -- expanding trading hours to 24/7 would disrupt current risk management practices, increase operational costs, and create unnecessary exposure," said NGFA President and CEO Mike Seyfert in a news release. "We hope the CFTC will recognize that longer trading hours do not equal stronger markets."

NGFA is one of 30 that have submitted comments since acting CFTC Chairman Caroline D. Pham issued the request last month. The CFTC asked for comments on "the potential uses, benefits and risks of trading on a 24/7 basis in the derivatives markets the CFTC regulates," which would include grain, oilseed and livestock futures products.

"As I have long said, the CFTC must take a forward-looking approach to shifts in market structure to ensure our markets remain vibrant and resilient while protecting all participants," said acting Chairman Caroline D. Pham. "One evolving trend is the move to 24/7, 24/6, or 24/5 trading hours. I look forward to the public comments on this market innovation."

NGFA's letter explained that its membership is comprised of commercial grain hedgers that use futures markets to reduce the impact of price fluctuations on their bottom line, "essentially locking in a price for the future to help budget and control expenses."

When a grain elevator, ethanol plant or other NGFA member agrees to buy grain from a farmer in the future, they match that contract with a position on the futures board.

NGFA argues that expanding trading hours to 24/7 would increase risk without a significant benefit. It highlighted five key issues:

-- Spreading liquidity across a larger time frame could create unnecessary volatility and potentially widen bid-ask spreads, which could expand potential opportunities for market manipulation.

-- Cash markets don't trade around the clock, and the mismatch creates additional risk exposure and complications when setting cash prices.

-- Daily reconciliation functions are completed after the market closes, and commercial hedgers rely on closing data to manage their risk and exposure in cash markets.

-- A pause in trading is needed for physical delivery of futures contracts. "This pause allows those involved in physical deliveries to assess what is changing in cash markets as well as in futures markets and ultimately their delivery economics," the letter states. "NGFA believes that actions in the delivery market are what lead to convergence, and convergence is a critical function of the agricultural futures contracts that benefits our members."

-- Companies would have to increase staff to monitor markets during the expanded weekday hours and weekends.

A trader named Jonathan Stettin submitted comments on his own behalf, not his company's, arguing a switch to 24/7 trading would devastate traders' home lives. "Sleep will become much more difficult when our trades can go haywire at all hours of the night," he wrote, adding that he purposely avoids trading futures contracts already because of the expanded hours of trade.

Yet, it's a direction on other markets under CFTC's purview -- like cryptocurrencies -- have embraced.

"Online trading platforms and fintech companies functioning as exchanges recognize that the financial markets are now global, interconnected, and perpetually active," commented R. Tamara de Silva, founding attorney of De Silva Law Offices, on behalf of his clients in traditional futures and digital asset sectors. "This continuous trading environment reflects current market realities and increasingly global investor expectations. Trading nearly continuously could improve market access, price discovery, and responsiveness to global events."

That said, he also shared concerns about liquidity, operational resilience and potential market manipulation during thinly traded periods. He suggests a carefully managed 24/6 schedule could balance those concerns but also suggests incorporating blockchain technology into the settlement process, which could improve back-office operational efficiency.

CFTC's request for comments is typically a preliminary step in proposing a rule change.

You can read NGFA's full letter here: https://www.ngfa.org/….

More comments can be found here: https://comments.cftc.gov/….

Katie Dehlinger can be reached at katie.dehlinger@dtn.com

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