For active traders, knowing when and when not to trade is a key part of conducting business competently. Desirable market conditions, specifically those that feature robust liquidity, promote efficient trade. Without adequate market depth, the trade-related costs associated with slippage, wide bid/ask spreads, and choppy price action can destroy profitability.
To avoid such pitfalls, it is important to be aware of the futures trading holiday schedule. Early halts and exchange closures greatly impact public participation levels and liquidity. Unless your strategy is designed to handle sub-par order flow, it is better to take a break from the markets during these challenging times.
Early Halts and Market Closures
When it comes to the futures markets, there are two basic types of holiday sessions: outright closures and early halts. Here is a quick look at the two scenarios and how each impacts market behavior.
An early halt occurs when the exchange decides to abbreviate the trading day. This can affect market behavior in a number of ways and is worth noting on your futures trading holiday schedule. Early halts regularly exhibit these tendencies:
- Open: On the Chicago Mercantile Exchange’s (CME) Globex platform, the opening time for many products remains unchanged. However, for those contracts that are pit traded or adhere to unique hours, such as agricultural products or bonds, opening times may vary.
- Early session: In the case of extremely liquid contracts—such as West Texas Intermediate (WTI) crude oil, gold, or the E-mini S&P 500—early session action can be robust. For instance, if the New York Stock Exchange (NYSE) is open for business, the trade of equities index futures will likely be close to normal during the first 90 minutes following the cash open (8:30 a.m. CST).
- Close: As a general rule, the futures trading holiday schedule for an early halt designates market close at or in the vicinity of noon CST. This is a key consideration for active future traders because it represents daily settlement. In the event that an open position is carried into an early holiday session close, overnight margin requirements apply.
Some futures traders don’t mind trading on days with an early close, but many avoid the situation completely. A noon CST halt poses many challenges, specifically lagging liquidity and limited time for live trades to play out. Although it is technically still possible to conduct business, a majority of market participants limit exposure or take the day off entirely.
In contrast to early halts, a futures trading holiday schedule that features a market closure is relatively easy to deal with. Under a full-scale closure, equities, futures, and forex venues are shut down. New Year’s Day, Good Friday, and Christmas Day are three examples of holidays when all markets are closed.
However, although a market closure means that no trading is possible, the periods immediately before the close and after the re-open may be particularly active. In many cases, traders and investors limit risk exposure ahead of holiday closures and assume risk upon the market’s re-open. Even though this phenomenon does not occur 100 percent of the time, sudden spikes in asset values are possible during these times.
It is important to remember that money and the markets never sleep. Should news break over a market closure, prices are very likely to react when trading resumes. Because of this issue, retail and institutional traders often choose to hedge systemic risk exposure ahead of and immediately following market closures.
Know Your Futures Trading Holiday Schedule
Understanding when price action and market liquidity may become disjointed is a key part of avoiding undue risk. If you’re going to be active in the commodity, equity index, or bond markets, it is essential to know your products’ futures trading holiday schedule.
To get up to speed on this year’s scheduled early halts and market closures, check out the Daniels Trading article “Futures Trading Holiday Schedule For 2020.”