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The US derivatives regulator is set to block CME Group’s bid to fast-track the listing of a 24/7 oil contract over concerns that the energy market is ill-equipped for a flood of round-the-clock derivatives.
CME, which has sued the Commodity Futures Trading Commission over its decision to greenlight the listing of certain crypto derivatives, said in June that it planned to offer 24/7 trading for a new 10-barrel futures contract linked to West Texas Intermediate oil, citing investors’ desire to manage their positions “whenever news breaks”.
On Wednesday, the exchange filed to self-certify the new product, giving the CFTC one day to intervene before the contract could list.
The regulator, whose chair Michael Selig has met a succession of executives at energy companies including Shell, Vitol, BP and ExxonMobil in recent weeks, plans to block CME’s self-certification, according to a person familiar with the matter. A separate application by CME for the same product, which has a 45-day review process, is still under consideration by the regulator.
The CFTC was concerned the rapid approval of the 24/7 mini-contract would immediately open the door to larger offerings, which could strain the market’s ability to handle big volumes of trades at times when it has previously been closed, according to the person familiar with the agency’s thinking.
The CFTC declined to comment.
CME said it would typically use the self-certification process for a “smaller” 24/7 version of an existing product such as the 10-barrel oil contract, but that it had also applied through the lengthier process at the CFTC’s request.
CME’s push to launch the new contract, which would allow trading in much smaller lots than a standard 1,000-barrel futures contract, follows a flurry of retail interest in oil markets as prices swung dramatically during the US-Iran war.
It also comes after CME last month filed a lawsuit against the CFTC for its approval of so-called perpetual crypto derivatives — contracts that allow traders to bet on digital asset prices but never expire like traditional futures — in a sign of growing rivalry between traditional trading venues and fast-growing prediction markets.
CME said the agency’s order was “issued without public comment or reasoned decision-making” and flouted major legislation. The CFTC said it looked forward to “dismissing this frivolous lawsuit”.
Perpetuals, or perps, dominate offshore crypto markets but were banned in the US before the CFTC in May made an exception for bitcoin. Prediction market Kalshi and crypto exchange Coinbase have since listed perps linked to a host of smaller cryptocurrencies.
Leveraged oil perps offered by Singapore-based trading venue Hyperliquid have become wildly popular since the start of the war in Iran as traders have flocked to place bets on price fluctuations on weekends when traditional oil markets close. Throughout March, US President Donald Trump tended to intensify his threats against the Iranian regime over weekends.
Some energy market participants say there is an increasing need for 24/7 contracts.
“Many government actions, [extreme] weather or industrial accidents may and do happen on weekends, and market participants then have a need to take trading actions but can’t,” said Jorge Montepeque, oil analyst at Onyx Capital Group.
“Opening the markets 24/7 makes sense and then we will see if there is sufficient liquidity,” he added.
