CFTC Clears Equity Perpetual Futures on US Exchanges

Perpetual futures on individual US stocks can now trade on American exchanges, the chairman of the Commodity Futures Trading Commission said on 3 November. In a statement released by the CFTC, Michael S. Selig said the contracts “can begin trading for the first time on CFTC-registered exchanges”, meaning exchanges also registered with the Securities and Exchange Commission to trade security futures.

The announcement names no exchange, no stock and no launch date. What it does settle is the legal box these products sit in. Equity perpetual futures, which never expire and have mostly traded on offshore crypto venues, are being treated in the US as security futures under joint CFTC and SEC oversight. Wall Street’s main trade body has already asked both agencies to slow down.

In brief

The CFTC chairman says equity perpetual futures were “deemed approved” as security futures products and can trade on exchanges registered with both regulators.
No venue, ticker or start date was named; SIFMA says rule filings came from four designated contract markets.
SIFMA wants the SEC and CFTC to stay or reopen those filings for public comment before launch.

What the CFTC statement says

In his full statement, Selig said the contracts “were deemed approved by the Commission, pursuant to Commission Regulation 40.3, as security futures products under the Commodity Futures Modernization Act of 2000”. As a result, he said, they “are thus subject to the applicable requirements of the Commodity Exchange Act, the U.S. Federal securities laws, and the regulatory frameworks of both the CFTC and the SEC”.

A footnote defines the exchanges as “designated contract markets that are dually registered with the SEC as notice-registered national securities exchanges to trade security futures products”. Selig called the step an extension of perpetual contracts “beyond digital commodities and into traditional securities”, following the CFTC’s May approval of a bitcoin perpetual contract, which his footnote identifies as Kalshi’s BTCPERP.

His case rests on where the trading happens. Bringing them into regulated markets, he said, means traders can use them “within the protections of the CFTC’s proven regulatory framework, rather than being forced to turn to offshore, and often unregulated, venues”. TSN has reported on how those offshore markets behave, including $51.6m of chip-stock perps liquidated in 10 minutes on a Saturday while US markets were shut.

The statement also leans on the CFTC-SEC memorandum of understanding signed in March, and on SEC Chairman Paul Atkins’ description of products “stranded” in a regulatory “no man’s land”. No joint statement from the SEC had been published alongside it.

SIFMA asks for a wider review first

On the same day, the Securities Industry and Financial Markets Association said it had filed a comment letter with both agencies on rule filings by “four designated contract markets (DCMs)” to list equity perpetuals as security futures. It did not name them in its release.

SIFMA argues that contracts with no expiry “differ meaningfully from the traditional single stock futures the security futures framework was designed for”. Its letter asks the regulators to assess the effect on liquidity, price discovery, capital formation, investor protection and “cross-market manipulation risk in a nearly continuous trading environment”. It also wants them to decide whether the products are security futures, swaps or security-based swaps, and to use the CFTC’s power to stay the filings or the SEC’s power to abrogate them and require refiling with public notice and comment.

“We encourage the SEC and CFTC to work through those questions together, with the benefit of public comment, before these products are offered to investors,” said Kenneth E. Bentsen, Jr., SIFMA’s president and chief executive.

A compliance reading of the dual framework

The classification question is not new. In June the two agencies published a joint request for comment on the swap definitions, which included questions on cash-settled “perpetual” contracts referencing an equity security. Selig’s statement gives the CFTC’s answer for these filings: security futures. SIFMA’s letter is, in effect, a request that the agencies finish that process before anyone trades.

For firms, the security futures label matters because it brings both rulebooks into play. Brokers offering the contracts would be dealing in a product the CFTC calls subject to “the U.S. Federal securities laws” as well as the Commodity Exchange Act, so customer suitability, margin and surveillance questions sit with both agencies. The contracts’ defining features, no expiry and near round-the-clock trading, are exactly where SIFMA sees risk to the underlying share market, because a perpetual price can move when the stock itself is not trading.

There is also an issuer angle. Companies have already pushed back against having their shares wrapped in new products, as seen in the objections to OKX and ICE tokenised stocks. Equity perpetual futures reference a single company’s stock, so the same questions about consent and price effects are likely to follow.

Finally, the CFTC under Selig has been assertive about its own reach, including suing Utah over a Kalshi case. Its statement stresses harmony with the SEC, but until the SEC speaks publicly on these filings, that harmony rests on one agency’s account.

Which exchanges come next

Several US venues have been preparing for perpetual contracts. TSN reported on 29 October that ICE and Trade[XYZ] plan a US-regulated perps market built on Hyperliquid, pending CFTC approval, though neither the CFTC nor SIFMA has said which four exchanges filed for equity perpetuals. CoinDesk reported that the statement did not identify the venues or the stocks available at launch.

The first concrete sign will be a listing notice from one of those exchanges. The second will be whether the SEC uses its abrogation power, as SIFMA asks, or lets the first equity perpetual futures start trading.