As global trading trends move toward 24-hour markets with no days off, the U.S. Commodity Futures Trading Commission argued that might be a good thing for new blockchain-native players, but that expanded hours might not be appropriate for some of the traditional markets, the derivatives watchdog said in a letter Friday to all of the firms it regulates.
The notice – issued the same day the agency gave the green light to native crypto platforms offering perpetual futures – marks what could be a growing divide between traditional companies and new entrants.
“Due to inherent differences between underlying markets, the move to 24/7 trading and clearing may not be suitable for all asset classes at this time,” the agency wrote to its regulated exchanges and clearing operations.
“The ability to enter and maintain markets 24/7 has, in part, paralleled the evolution of market technologies, such as blockchain networks and decentralized infrastructure, alternative forms of collateral, including stablecoins and crypto assets, and market accessibility via smartphones and associated software applications,” the CFTC noted. “With this development, a growing number of platforms, with a growing list of tradable products, are providing 24/7 access to retail and institutional participants.” However, he says, “other derivatives markets, such as those for agricultural products, might be less
suitable for 24/7 trading due to their unique customer base, regional nature and specialist expertise.
trading and hedging practices in these markets.
The derivatives watchdog’s primary concern is the potential for market abuse in less-observed, off-peak activity, saying that “extending trading hours to a 24/7 schedule for certain markets or products could potentially result in reduced liquidity, increased volatility, widening of bid/ask spreads and, therefore, create greater opportunities for market manipulation.”
Platforms are responsible for policing themselves as the first line of defense and “should implement additional compliance measures designed to address the unique challenges associated with longer trading hours.”
The notice was intended to outline considerations for companies seeking to extend trading hours, and the CFTC urged them to communicate their plans to the agency.
The current head of the agency, Chairman Mike Selig, has made the adoption of new technologies, including crypto and prediction markets, one of his top priorities. His enthusiasm for progress – followed by orders and encouragement from President Donald Trump – has led to an increase in crypto policy work intended to pave the way for regulation for the industry.
One of the native crypto companies overseen by the CFTC, Coinbase, said in a blog post on its website Friday that it is trying to rebuild traditional financial services atop crypto infrastructure.
“The stocks, futures and prediction markets all operate 24/7 on our platform,” the company said, highlighting the agency’s new allocation of global options and kinks through one of its CFTC-regulated subsidiaries. “Today’s announcement adds the largest and most liquid category in global cryptocurrency trading to this lineup.”
