Equity perpetual futures, contracts that track a single US stock with no expiry date, can now trade on regulated American exchanges. CFTC Chairman Michael Selig said so on Tuesday. The green light came one day after the securities industry’s main trade group asked both market regulators to slow the process down, and it leaves the SEC with a window in which it can still pull the rules back.
“Today, perpetual futures contracts on individual equity securities (the ‘Equity Perps’) can begin trading for the first time on CFTC-registered exchanges,” Selig said in a statement. He said the contracts were deemed approved under CFTC Regulation 40.3 as security futures products. That puts them under both the Commodity Exchange Act and the federal securities laws, with the CFTC and the SEC sharing oversight.
What was actually approved
Selig’s statement names no exchange, no stocks and no launch date. A footnote explains that “CFTC-registered exchanges” means futures exchanges that have also notice-registered with the SEC to list security futures. The public record shows which venues those are. In September, four crypto-linked futures exchanges filed rules with the SEC to list perpetual security futures: Coinbase Derivatives, KalshiEX, Bitnomial Exchange and the North American Derivatives Exchange.
Kalshi’s filing, published in the Federal Register on September 23, shows how narrow the first wave is meant to be. An eligible stock needs a market value of at least $100 billion, more than 20 million shares of estimated deliverable supply and average daily trading of at least $450 million over the prior six months. Brokers must collect margin of at least 15.50% of a position’s market value, which works out to maximum leverage of about 6.5 times.
The contracts work like crypto perps. There is no settlement date, and longs and shorts swap periodic funding payments that pull the contract price toward the stock price. Traders exit by taking an offsetting position.
Wall Street asked for a pause
On November 2, SIFMA sent the SEC a comment letter on the four filings. It asked the CFTC to use its power to stay or deny approval. Failing that, it wanted the SEC to abrogate the rules and make the exchanges refile them under the standard Section 19(b)(1) process, which includes a full public review. The letter cites earlier objections from Cboe, CME Group and Nasdaq, each dated October 14.
SIFMA’s main worry is off-hours price discovery. Stocks trade mostly during regular hours, while these contracts are meant to trade almost around the clock. The group gave a weekend example. If equity perps trade over the weekend, the underlying stock could open on Monday at whatever price the perp implies. It also warned that automatic liquidation engines, acting when the underlying market is closed and volumes are thin, could set off chains of further liquidations. Its other points were that contracts listed on different exchanges would not be interchangeable, and that the products look a lot like contracts for difference, which US regulators have long kept away from retail investors.
The CFTC went ahead regardless, and Selig made the case for onshoring. Bringing the products into regulated markets means Americans can use them “rather than being forced to turn to offshore, and often unregulated, venues,” he said. That argument carries weight because the offshore market is already large. CoinDesk, citing DeFiLlama data, reported more than $630 billion in perpetual volume over the past month, much of it on venues such as Hyperliquid that US regulators do not oversee.
How this fits the CFTC’s perps push
This is the second step of a plan Selig has pushed since taking office. In May the agency approved Kalshi’s bitcoin perpetual contract, the first true perp on a CFTC-regulated venue. CME answered with a lawsuit, as we covered when CME sued the CFTC over Kalshi’s bitcoin perpetual futures approval. A June policy statement then said perps on assets other than bitcoin, including equities, would need a full 40.3 review. Tuesday’s decision is the result of that review.
Selig also pointed to the memorandum of understanding the CFTC and SEC signed in March, and quoted SEC Chairman Paul Atkins, who has described products stuck between the two agencies as sitting in a regulatory “no man’s land”.
What to watch next
The first thing to watch is which exchange lists first and on which stocks. With a $100 billion market value floor, early contracts will probably cover the largest US names. The second is the SEC. Kalshi’s notice says that within 60 days of the rules taking effect, the SEC, after consulting the CFTC, may summarily abrogate them and require a refiling. SIFMA has asked for exactly that.
The third is CME’s existing case against the CFTC. It argues that contracts with funding payments are swaps rather than futures. A ruling for CME would reach well beyond bitcoin.
FAQ
What are equity perpetual futures?
They are futures on a single stock with no expiry date. Longs and shorts exchange funding payments that keep the contract price close to the share price.
Which exchanges can list equity perps?
Futures exchanges that are also notice-registered with the SEC. Coinbase Derivatives, Kalshi, Bitnomial and the North American Derivatives Exchange filed listing rules in September.
Can the approval still be reversed?
Yes. The SEC can summarily abrogate the exchanges’ rules within 60 days of their taking effect, which SIFMA has requested.
Disclaimer: This article is for informational purposes only and does not constitute financial advice.
