The US Commodity Futures Trading Commission (CFTC) has issued an advisory on the expansion of trading hours, highlighting the complexities and challenges that come with it.
According to the agency, the crypto sector's inherent differences and market technologies make it more suitable for 24/7 trading. The CFTC notes that the increased accessibility through smartphones and associated software applications has led to a growing number of platforms providing 24/7 access to retail and institutional participants.
However, the agency also warns that other derivatives markets may be less suited for 24/7 trading due to their unique customer bases, regional nature, and specialized trading practices. The CFTC is concerned about the potential for market abuse in off-peak hours, citing reduced liquidity, increased volatility, and widened bid-ask spreads as potential risks.
Regulated companies are urged to implement additional compliance measures designed to address these unique challenges associated with expanded trading hours. The agency also recommends that firms communicate their plans to the CFTC and consider the potential impact on their business models.