Retail Traders Find a Back Door to 24/7 Oil Trading

Welcome to our guide to the commodities driving the global economy. Today, reporter Mia Gindis looks at mounting warnings over 24/7 oil trading among retail investors.

In recent months a debate has intensified over whether US regulators should allow oil futures trading to be extended around the clock.

There are signs that some US retail investors are already trading commodities 24/7 quietly — and illegally — via virtual private networks, or VPNs.

That method enables the circumvention of geographic restrictions to access offshore platforms, according to established commodity operators who are warning of potentially negative consequences. Some traders leverage it to buy and sell oil outside of traditional market hours.

The allure of this kind of access has grown with the volatility triggered by the Iran war, and the Trump administration’s knack for dropping news after incumbent exchanges have rung the closing bell.

Warnings about VPN trading trend grew louder this week. The Commodity Markets Council, an industry group representing regulated exchanges and major commodity trading firms, expressed its concerns in a letter to the Commodity Futures Trading Commission.

The council outlined three potential consequences. First, US customers going offshore lose protections offered by the Commodity Exchange Act. Second, the CFTC has no visibility into trading positions held offshore, reducing the effectiveness of its market surveillance.

The group also warned that growing weekend and overnight trading volumes on unregulated offshore venues can impact the opening moments of trading in benchmark contracts on established exchanges, before some participants are able to act. The council says such a phenomenon can already be observed due to so-called perpetual futures that trade offshore.

“There’s no one policing that activity,” said Terry Duffy, the boss of CME Group Inc., one of the biggest regulated commodity bourses, in a Bloomberg Television interview this week. “I find that to be troublesome.”

The situation echoes earlier disputes between the CFTC and crypto exchanges Binance Holdings Ltd. and KuCoin. In its letter, the Commodity Markets Council urged the regulator to follow that playbook and clamp down on offshore platforms allowing US customers to gain oil exposure.

Whatever happens, the commodities establishment appears to be resigned to the fact that 24/7 trading of some kind is inevitable. The council acknowledged as much in its letter.

“The question is whether that exposure will be governed by one consistent set of standards, and whether those standards will be enforced,” it said.

—Mia Gindis, Bloomberg News

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