CME suspends plans for its 10-barrel, around-the-clock oil contract

CME Group on Friday withdrew its filing for a 10-barrel crude oil futures contract built to trade around the clock, including weekends. Chairman and Chief Executive Terry Duffy said the launch is suspended "at this time."

The contract could not have listed anyway. On Wednesday, July 8, New York Mercantile Exchange, a CME Group exchange, filed to list it from Sunday, August 30, and the next day, Thursday, July 9, the Commodity Futures Trading Commission, which regulates U.S. futures markets, stayed that listing. CFTC Chairman Michael S. Selig said in that release that CME's "decision to disregard the Commission's effort to undertake a reasoned analysis of the critical issues at stake is wholly inappropriate," and that the agency does not take a one-size-fits-all approach to around-the-clock trading.

The public comment period closed on Wednesday, August 26. The Commission has not ruled. On Friday CME pulled the filing before a ruling.

Duffy said CME had planned the contract as "a transparent, regulated alternative" to oil products that "already trade around the clock, primarily for retail participants." He described the venues as onshore prediction markets and offshore perpetual contracts, which have no expiry date. He said the offshore products are illegal for U.S. participants but may still be reached through virtual private networks.

He asked the CFTC to "address the inequity" and "reestablish the level playing field." Other venues, onshore and offshore, already offer that round-the-clock oil, he said, and he had hoped to offer "a safer, more transparent alternative, within the U.S. jurisdiction and CFTC oversight."

He said the company is withdrawing the filing because "key constituents are concerned that introducing 24/7 trading in energy without further due diligence could create unintended consequences, possibly introducing additional risk in the marketplace."

On Tuesday, July 28, a Federal Register notice from the Commission described the contract as trading through weekend periods "during which the underlying physical crude oil market is not assessed." Those are hours with no published price assessment for the physical oil. The same notice asked for comment to the extent industry participants "are not presently prepared to support 24/7 trading."

Crypto futures and options at CME have traded around the clock since Friday, May 29, and CME says its 1-ounce gold futures do too. The Commission stayed the oil contract, not those.

Kelvin To of Data Boiler Technologies wrote on Wednesday, August 26, in a public comment on around-the-clock energy futures, that overnight and weekend sessions are "characterized by thin trading volumes" and that price discovery in those hours "becomes inherently unreliable." He also wrote that prime brokers hitting weekend margin deficits will sell other assets at Monday's open. Nothing in Duffy's statement identifies To as one of those constituents.

The contract would have covered 10 barrels, one-hundredth the size of the 1,000-barrel West Texas Intermediate future, the main U.S. crude benchmark, and one-tenth the size of the 100-barrel Micro contract CME already lists. It would have paid cash, using the standard contract's final price, rather than delivered oil. Friday's withdrawal does not change those two contracts, which still trade nearly around the clock on business days and were not built to run through the weekend.

CME has handed that inequity to a regulator that has not yet ruled.