Comment Text:
Olam Global Agri Pte. Ltd.
May 21, 2025
Mr. Christopher J. Kirkpatrick
Secretary of the Commission
Commodity Futures Trading Commission
Three Lafayette Centre
1155 21st Street, NW
Washington, DC 20581
Via Electronic Submission
Re: Request for Comment on Trading and Clearing Derivatives on a 24/7 Basis (April 2025)
Olam Global Agri Pte Ltd. (“Olam” or “we”) appreciates the opportunity to submit this letter in response to the Commodity Futures Trading Commission’s (“CFTC” or “Commission”) request for comment on trading and clearing derivatives on a 24/7 basis.
Olam is a market leading and differentiated agri-business, with a global origination footprint, processing capabilities and deep understanding of market built over 35 years.
Our global sourcing capabilities enable us to reliably source and deliver high-quality products to customers around the world. Our world-class processing operations have unparalleled operational efficiency in transforming raw materials such as grains, rice and cotton and produce value-added products including flour, pasta, semolina, fortified branded rice and animal feeds. And our expertise in supply chain management, logistics and distribution allows us to handle, store, transport and distribute food, feed and fibre, efficiently and cost-effectively. Using digitally integrated capabilities, we provide market access to farmers and deliver supplies customers can rely on. Our world-class trading team and best-in-class risk management, systems and processes allow us to manage risks for our customers in real-time. A very important piece to the risk management of our customers and trade flows is participating on the exchanges, whereby we can offset certain risks including price and term structure (calendar) risk. Inasmuch, Olam has very strong and lengthy relationship with the ICE and CME exchanges, two very important partners who help us manage customer risk.
Olam, in its role as merchant or intermediary between the producers and consumers, takes on the role of managing/hedging price risk (as well as other risks eg. Counterparty, credit, FX, etc.) for our clients. As a commercial hedger, the most effective tool to manage these risks are derivative contracts.
The introduction and potential impacts of a 24/7 trading scheme would be significant on multiple fronts including:
• [Volume] Liquidity
• [Bank] Liquidity
• Market Integrity
• Operational / Infrastructure
• Regulatory
Therefore, based on the potential for negative impact to overall market stability and efficiency, Olam does not support extending trading hours to a 24/7 model.
• [Volume] Liquidity – by extending hours, effectively this will dilute concentration of traded volume and create pockets of illiquidity in “off-market hours”, especially late at night and on the weekends. As a commercial merchant, who relies on these markets to hedge price, in very low margin businesses, it is paramount for our ability to be able to buy or sell derivatives as feasible volumes.
An old but very relevant example is the Sugar markets when its use to trade under the CSC on the commodity floor in NYC. There would on occasion be half days of trading for the Sugar pit, where daily hours would be reduced from 3 hours 50 minutes to 1 hour 50 minutes. Not surprisingly, volumes on these half days would be equal or be greater than a normal trading day. This is concentration of volumes in a finite period. Conversely, if markets are extended to 24/7 scheme, we would expect the opposite to happen and as discussed with finite volume over longer periods of time, there will be pockets of extreme liquidity. Some market participants may try and take advantage of this by pushing prices and hitting stops to create momentum, when none should exist.
Not only is this an existential risk to the commercial hedger being able to put on a hedge for a physical position of a client, it would also introduce the potential for increased volatility, whether intentional or not.
• [Bank] Liquidity – it is not clear at all the mechanisms for banks and FCMs and margining and margin financing. It is clear banks and FCMs are not open on the weekends and there are no sources of additional funds that can be moved during non-banking hours. The question that many of our counterparts in these markets are asking is a simple question – what happens if we get a margin call over the weekend?
If a margin call is incurred over the weekend, would there be a chance of auto-liquidation because a merchant like us didn’t have enough funds in their bank/FCM to cover the call? Would Olam have to “top up” margin on a Friday in anticipation of potential margin calls? In any case, this is an inefficient use of capital and even more ominous is the possibility of being liquidated out of a hedge, due to illiquid price volatility, when otherwise, if the banks were open, Olam would be able to pay margin and hold the position.
The very fact that a merchant could be auto liquidated out of a hedge is very core to the existence of the derivative markets themselves.
• Market Integrity – has been touched upon earlier in conjunction with increased illiquidity of the markets and (un)intentional market manipulation. The danger of an illiquid market is that it could take a very small position to move the market in an outsized manner. A small position can move the market enough to execute a stop, further adding to the momentum of the movement and a potential outcome could be a “flash crash” type scenario, where the momentum keeps triggering more volume traded in the same direction. There have been too many cases of this type of behaviour and even on an unintentional basis, these “flash” crashes happen on a frequent periodicity.
• Operational/Infrastructure – covers a broad topic from additional manpower on the trading, middle and back office to accommodate 24/7 hours, as well as system enhancements to be able to track the new market timings. As a merchant, our job is providing liquidity and a conduit between the supplier and consumer, and these additional costs would be burdensome, more so for small operations, who may not be able to bear the additional costs. If we price out the small businesses, it’s a negative cycle of liquidity destruction.
From an analytics perspective, it would have a de-stabilizing effect in the normalization of data. Technically, what is considered the Open Price, Close Price, etc. Equally destabilizing are “like’ overseas markets (eg. London Cocoa and Coffee, Chinese Cotton and Soybeans, etc) where there are specific relationships between two or more exchanges. This relationship could lead to greater market manipulation and destabilization between the markets. An example would be US Cocoa is now open 24/7 while London Cocoa is still on a 5-day trading week – arguable one could build a position in London and then through illiquid markets in NY over the weekend, push prices and create volatility in NY markets towards the London position and when London starts trading on that Monday, there could be significant gap opens. This is just another example of potential market inefficiencies certain players could take advantage of.
• Regulatory – the CFTC and the exchanges must provide statutory guidance in rules, regulations and best practices in this new environment – everything from order handling, position disclosure statements, volatility controls and margins to name the top clarification points. The exchanges in conjunction with the CFTC need to provide clarity on margins (especially over weekends), liquidation.
Olam thanks the CFTC for the opportunity to respond the 24/7 RFC. If you would have any questions or clarifications for the above information, please do not hesitate to contact me directly at [email protected].
Sincerely,
Paul J Park
Chief Market Compliance Officer
T: 917 663 6770
E: [email protected]
