CFTC Clears Path for Perpetual Futures on Individual Stocks

A crypto trading structure reaches stocks

Perpetual futures tied to individual stocks can begin trading on qualifying U.S. exchanges, Commodity Futures Trading Commission Chairman Michael Selig said November 3. The announcement extends a contract structure popular in crypto markets into individual equities under a framework overseen by both the CFTC and the Securities and Exchange Commission.

The announcement does not mean every brokerage will immediately offer these products. Selig's statement did not identify the exchanges that will list them or the stocks available at launch, CoinDesk reported.

---

How perpetual futures work

A perpetual future gives traders exposure to an underlying asset's price without requiring them to own the asset. Unlike a conventional dated futures contract, a perpetual contract has no scheduled expiration. Traders generally close a position themselves or face liquidation if they cannot satisfy margin requirements.

Perpetual contracts often use funding payments or other pricing mechanisms intended to keep contract prices connected to the underlying market. The details depend on the exchange and the contract. A position can remain open, but the costs and risks do not disappear: leverage can magnify losses as well as gains, and collateral can be exhausted during fast moves.

Owning a stock and holding a derivative linked to it are different exposures. Investors should examine each contract's settlement terms, trading hours, funding mechanism, margin rules and treatment of corporate actions before assuming it behaves like the underlying shares.

---

Where regulation fits

Selig said the equity perpetual contracts were deemed approved as security futures products under CFTC Regulation 40.3 and the Commodity Futures Modernization Act of 2000. That places them within applicable commodities and federal securities laws and the regulatory frameworks of both agencies.

The CFTC clarified that eligible venues are designated contract markets also registered with the SEC as notice-registered national securities exchanges for trading security futures products. The agencies announced a coordination agreement earlier this year, addressing products that cross their jurisdictions.

The development follows the CFTC's approval in May of a Bitcoin perpetual futures contract on a regulated U.S. exchange. Selig said the goal is to give U.S. participants access to these products under domestic oversight.

---

What comes next

Perpetual futures have become a major part of crypto trading, including on offshore and decentralized venues. Applying the structure to stocks could give traders another way to express a view or manage risk, but the actual market will depend on which contracts are listed and whether they attract liquidity.

Even where a venue operates for extended hours, the underlying stock market may be closed. That can complicate price discovery when news breaks outside normal stock trading hours. The practical terms of each listed contract, including its reference price and trading schedule, will matter more than the general label.