As part of the CFTC’s drive for market innovation, it has recently turned its focus to two related but separate areas, namely 24/7 trading and the trading of perpetual contracts. This week the CFTC announced a consultation on these two topics specific to energy derivatives trading (click here).
Regarding the first topic, 24/7 trading is where the trading of standard futures contracts is extended to trade continuously every day of the week (and importantly, including weekends and holidays), while keeping the same fixed expiration, delivery, and settlement terms. This is not an entirely new topic for the CFTC, which previously consulted on it in 2025 (click here). The CFTC notes that some venues have already announced the extension of trading in certain energy futures to a 24/7 schedule.
The second topic involves so-called perpetual contracts. This refers to derivatives with no fixed expiration date that use a periodic funding-rate mechanism to keep their price close to the underlying spot price. In May this year, the CFTC experimented by permitting a crypto exchange to list a perpetual contract referencing the spot price of Bitcoin. The various publications from the CFTC relating to this development, including a policy statement, may be found here, here, here and here. The CFTC is now consulting further on both topics.
The legal basis for conducting the consultation focuses mostly on the ability of Designated Contract Markets (i.e. Exchanges) to monitor 24/7 trading and trading in perpetual contracts to prevent manipulation, including the ability to apply and oversee the application of federal position limits. The consultation questions are broad and explore many fundamental questions about how such arrangements might practically work, and whether they are suited to energy markets (including for physically delivered or storable energy commodities such as crude oil).
While it is still at relatively early stages, the current CFTC leadership is pushing the innovation agenda aggressively, particularly with regard to these two topics. While 24/7 trading is not a new concept to many physical power market traders, the broader opening up of energy and commodity derivatives contracts will bring with it a range of challenges, not least of all concerning 24/7 surveillance, particularly over (likely) periods of lower liquidity in after hours or on non-business day trading. Perpetual contracts, should they proceed, are also likely to reveal a new set of novel compliance challenges not yet contemplated by many energy and commodity traders who may be accustomed to the more traditional contracts, including topics such as position limit management and position controls.
The question-driven consultation provides a useful basis, for those firms that have not done so already, to commence an internal discussion on these topics. This should include the involvement of senior management, front office, back office and operations (along with trading compliance of course) who will all be impacted should these two new concepts gain meaningful traction. While their introduction is likely to take some time, and even longer before becoming “mainstream”, firms have an opportunity to shape the CFTC’s posture on the topic and to begin developing an internal position and policy on whether to participate in such markets, and if so, under what conditions.