Selig Sets Derivatives Priorities as Trading Hours, Tokenized Collateral and AI Evolve

Round-the-clock markets are testing the assumptions behind derivatives oversight: when firms can trade, how they move collateral and which rules fit products that did not exist when many current requirements took shape. At SIFMA’s 2026 Annual Meeting on Tuesday, October 20, Commodity Futures Trading Commission Chairman Michael S. Selig described a review spanning trading hours, tokenized assets, crypto exchange access, artificial intelligence and the reach of bank capital requirements.

In a conversation with SIFMA President and CEO Kenneth E. Bentsen, Jr., Selig made clear that these questions are connected. Longer trading sessions require operational coverage and collateral at times when traditional banking services may be limited. New contract structures also bring the Commodity Futures Trading Commission (CFTC) and the Securities and Exchange Commission (SEC) into closer coordination.

Trading hours bring different demands by market

The CFTC’s approach to continuous trading will vary by asset class. The agency has allowed it in some cryptocurrency products and prediction markets, while commercial participants in agricultural and energy derivatives have raised concerns. “It’s not going to be a one-size-fits-all approach for 24/7 at the CFTC,” Selig said. Exchanges and market participants have been working with the agency on the practical issues.

Selig cited CME’s withdrawal of a proposed extended-hours offering for energy products, describing the exchange as cooperative in responding to industry concerns. The experience of negative oil prices during the COVID-19 pandemic also illustrates how extreme conditions can strain market operations. For firms, a move to longer sessions could mean staffing, systems and coverage outside customary hours. “If this is coming, I think firms need to start preparing for that,” he said.

Some products may require additional rules or action by Congress before they can trade continuously, Selig said. He acknowledged that the agency’s ability to delay their arrival has limits: “We can only hold up these products for so long.” The pace and form of any expansion will therefore depend both on product-specific risks and on whether firms can support trading beyond conventional hours.

Tokenized assets could ease collateral pressure

Weekend trading can leave firms holding more collateral than they otherwise would, because moving assets through traditional channels may be harder outside banking hours. Selig sees tokenized securities, stablecoins and other tokenized assets as a possible way to transfer collateral more freely during those periods. “When you’re offering 24/7 markets now, or weekend trading, typically what happens is you’re over-collateralizing,” he said. He described the ability to move tokenized assets outside regular hours as “a huge advantage.”

The CFTC is coordinating with the SEC on whether tokenized securities can serve as collateral in regulated markets. Smart contracts could also automate transfers according to specified conditions. Selig said the agency is working with software developers to understand blockchain-based systems and assess whether regulatory relief may be needed. He framed the potential benefit in market terms: “I view this as just a really exciting opportunity to bring more liquidity into our markets and to make capital much more efficient.” The practical value will depend on how these systems work and how their use fits within existing requirements.

New contracts test the boundary between securities and derivatives

Perpetual futures, which have no fixed expiration date, and renewed interest in security futures are prompting closer work between the CFTC and SEC. Selig said existing legislation gives room to accommodate perpetual contracts, which could be structured as futures or swaps. “I don’t think there’s any requirement in the statute to have an expiration date or anything like that,” he said, while leaving open the possibility of additional requirements for particular products.

Selig pointed to activity involving CME and firms seeking to list security futures perpetual products. The agencies are also working through product classification, cross-margining and jurisdictional questions involving derivatives and prediction markets. He compared the overlap between securities and derivatives oversight to a Venn diagram: depending on a product’s structure, it may sit within either framework. “We’re of course more harmonized as agencies, I think, than ever before,” he said of CFTC-SEC coordination.

Crypto access and surveillance remain open questions

After comprehensive crypto market structure legislation made little progress, the CFTC is pursuing a registration route under its existing authority for eligible cryptocurrency exchanges. The proposed framework would allow firms to register as designated contract markets (DCMs) or under a proposed crypto asset market (CAM) category.

Firms already registered as DCMs, futures commission merchants (FCMs) or derivatives clearing organizations (DCOs) could build on their existing compliance infrastructure, Selig said. The proposal would permit vertical integration, with separate registrations for brokerage, trading and clearing. But voluntary registration would leave some exchanges operating under state money transmitter frameworks, which Selig said were designed for payment businesses rather than markets. He argued that comprehensive legislation would provide a more durable basis for crypto oversight.

Artificial intelligence adds another surveillance challenge as trading firms and retail participants adopt more advanced systems. Asked whether safeguards such as circuit breakers would remain adequate if autonomous AI contributed to market disruption, Selig said the CFTC is monitoring use of the technology and considering updates to existing requirements. The aim, he said, is to allow AI-driven strategies while maintaining a framework for markets. The agency is also developing AI tools for enforcement and surveillance, with exchanges and the National Futures Association continuing their oversight roles.

Capital costs can affect commercial access

Selig also questioned whether bank capital requirements adequately reflect derivatives risk. The CFTC is engaging with other financial regulators on Basel III and its implications for FCMs and commercial hedgers. Selig said capital costs have discouraged some FCMs from serving smaller businesses, including farmers, ranchers and producers. Those firms may lose access to risk management markets or face demands to post excess money, he said, calling the effect detrimental.

Across these issues, Selig’s central concern is whether market rules and operating systems can keep pace with changes in trading and technology. “We’re in a completely different world than we were 20 years ago. Our markets have totally changed,” he said. The next test is whether agencies and market participants can adapt access, collateral and oversight arrangements to products that operate on different schedules and use different infrastructure.

The image for this article was generated using AI.