PERPs (perpetual futures)

[Saluki]

This came up in another post, but deserves it's own post. 

 

Why CME Is Really Suing the CFTC Over Perps

 

Anyone have any comments or questions about it? Feel free to chime in and if helpful, I'll answer legal questions from the perspective of a derivatives lawyer

 

 here's my take: 

 

• Perps ARE swaps, not futures.
• The CME wants them regulated as swaps because they are set up to trade (and clear) futures AND  swaps and the newcomer exchanges, like Kalshi, are set up for futures only, so classifying them as swaps would cut down the pool of potential competitors
• The CFTC called them futures because of regulatory capture (Trump Jr is a paid "advisor" to Kalshi and Polymarket) and to keep out defi protocols like Hyperliquid.
  • swaps can be traded off-exchange or on-exchange, but futures must be on-exchange. so by calling them futures, you make protocols like Hyperliquid illegal in the US. 
  • The license Kalshi has lets them do futures too, not just prediction markets
• Most exchanges don't trade 24/7 which is one of the reasons why some of them see Perps as a threat.
• Perps are easier to understand than options, so market heavyweights think it will suck retail order flow into these products

[thowed]

This is worth a read (if you can get over the paywall):

 

https://www.ft.com/content/b7a788de-0f31-4b31-992b-45ddf92ccdcb

 

I mean, I don't want to be too much of a doomer, but it's a cycle isn't it:

 

1) Relax rules and let people buy homes who can't afford them because they only go up.

2) Relax rules and let people violently speculate on the stockmarket, because it only goes up.