CFTC Approves Perpetual Futures for US Stocks, Expanding Trading Options

The Commodity Futures Trading Commission (CFTC) has officially cleared the way for perpetual futures contracts that track individual US stocks, a product previously available only through offshore exchanges. This approval, announced on Tuesday, allows American traders to engage in perpetual futures trading on regulated exchanges.

Perpetual futures differ from traditional futures contracts, which have a fixed expiration date. Instead, these contracts roll on indefinitely, enabling traders to maintain positions as long as they meet margin requirements. For instance, Kalshi, one of the exchanges that will list these contracts, allows traders to hold a stock position by posting just 15.5% of its value.

However, this leverage comes with risks. A Washington reform group has cautioned that positions can liquidate automatically during significant market downturns. The CFTC’s approval is seen as a response to the demand for more accessible trading options, allowing traders to avoid unregulated offshore venues.

Kalshi's recent filing includes 58 contracts covering major stocks such as Apple, Tesla, Nvidia, and Microsoft, along with two funds tracking the S&P 500 and Nasdaq-100. Trading for these contracts will take place from Sunday evening to Friday afternoon, Eastern Time.

Despite the opportunities presented by these new products, concerns have been raised regarding their potential to act as high-risk trading tools. Critics argue that the leverage offered could lead to significant losses, particularly in volatile markets. The CFTC's decision marks a notable shift in the regulatory landscape, with implications for both traders and the broader financial market.

CFTC Approves Perpetual Futures for U.S. Stocks

The Commodity Futures Trading Commission (CFTC) has approved the trading of perpetual futures on individual stocks on U.S.-regulated exchanges for the first time. This marks a significant expansion from offshore crypto venues to the equity market.

CFTC Chairman Michael S. Selig referred to these contracts as "Equity Perps," which are classified as security futures products under Commission Regulation 40.3. They will be available on exchanges that have both CFTC designated contract market registration and SEC notice registration.

Perpetual futures, which have no expiration date, allow for periodic funding payments between longs and shorts to keep the contract price aligned with spot prices. This structure has been prevalent in crypto derivatives markets.

The approval follows the CFTC's earlier approval of the first U.S.-listed bitcoin perpetual futures in May and is seen as a step towards integrating these products into traditional securities.

Additionally, the approval comes shortly after a significant security breach involving Binance, highlighting the risks associated with unregulated offshore exchanges. Selig emphasized the importance of regulated access to prevent such incidents.