The National Grain and Feed Association is urging the Commodity Futures Trading Commission to carefully consider the potential effects of expanding agricultural energy futures markets to 24/7 trading and introducing perpetual futures contracts.
In comments filed with the CFTC, NGFA said changes to derivatives market structures should not undermine risk management, market integrity or commercial firms’ ability to hedge price risk.
NGFA members rely on physically delivered futures contracts to manage risk in grain, oilseed and agricultural energy markets. The association said the existing market structure promotes convergence between cash and futures prices and recommended no changes to trading hours or contract design.
NGFA said continuous 24/7 trading in agricultural energy futures could create long-term risks and costs for commercial hedgers because the underlying cash markets do not operate around the clock. Differences in trading hours among grain, oilseed and agricultural energy futures also could complicate hedging strategies.
According to NGFA, expanded trading hours could reduce liquidity during traditional trading sessions, increase market volatility and require commercial firms to add staffing to monitor markets around the clock.
The association also opposed perpetual contracts for agricultural energy commodities. NGFA said physically delivered futures contracts remain the most effective mechanism for promoting convergence between cash and futures prices.
NGFA said it appreciates the CFTC’s efforts to seek stakeholder input and will continue engaging with the commission as it evaluates potential changes to futures market structure.
Source: National Grain and Feed Association, "NGFA urges CFTC to preserve market integrity in comments on 24/7 trading and perpetual agricultural energy contracts"