The National Grain and Feed Association filed comments with the Commodity Futures Trading Commission today urging the agency to carefully consider the impacts of extending agricultural energy futures markets to 24/7 trading and introducing perpetual futures contracts.
The trade group said that while innovation in derivatives markets can provide benefits, changes to market structure should not come at the expense of effective risk management, market integrity or the ability of commercial firms to hedge price risk.
“NGFA members rely on physically delivered futures contracts to manage risk in grain, oilseed and agricultural energy markets,” said NGFA President and CEO Mike Seyfert. “The current market structure has served commercial participants well by promoting convergence between cash and futures prices. We recommend no changes to trading hours or contract design to preserve these fundamental benefits.”
The association’s comments explain that expanding agricultural energy futures trading to a continuous 24/7 schedule could create long-term risks and costs for commercial hedgers because the underlying cash markets do not operate around the clock.
NGFA also warns that differing trading hours between grain, oilseed and agricultural energy futures could complicate hedging strategies, reduce liquidity during traditional trading sessions, increase volatility and require additional staffing while markets are open.
The association opposes perpetual contracts for agricultural energy commodities, stating that physically delivered futures contracts remain the most effective mechanism to ensure convergence between cash and futures prices.
NGFA said it appreciates the commission’s continued actions to seek stakeholder input and expressed its commitment to continued engagement as the CFTC evaluates potential changes to futures market structure.
