Perpetual futures, the derivatives that never expire, are moving into regulated trading venues. The shift has drawn both interest and concern from market participants, with critics warning that the products could import systemic risk from crypto into traditional finance.
What Perpetual Futures Are and Why They Matter
Unlike standard futures, perpetual contracts have no settlement date. Instead, they use a funding rate mechanism to keep the contract price close to the underlying asset's spot price. This design has made them a staple on crypto exchanges, where they account for the majority of trading volume. Now, regulated exchanges are exploring ways to offer similar products under existing frameworks.
The Systemic Risk Warning
Critics argue that the leverage and continuous nature of perpetuals could amplify losses during market stress. In crypto, flash crashes and liquidations have been common. Bringing those dynamics into regulated markets, they say, could create contagion across asset classes. The concern centers on how margin calls and funding rate spikes might interact with traditional clearing and settlement systems.
Chris Tyrer: Focus on Venue Design, Not the Product
Chris Tyrer, President of Bullish Exchange, pushes back against the idea that perpetuals themselves are dangerous. “The debate should be about venue design — leverage limits, margin rules, and how the index is constructed — not the contract type,” he said. Tyrer argues that a well-designed venue can manage the risks that critics point to, and that banning or restricting the product misses the real issue.
What Regulators Are Watching
Regulators in several jurisdictions are studying perpetuals as they consider rule changes. The key questions include appropriate leverage caps, whether to allow retail participation, and how to handle defaults when positions are marked to market continuously. Some exchanges have already proposed versions with tighter controls, but no major regulatory approvals have been announced yet.
The debate is likely to continue as more venues apply for permission to list these contracts. For now, the industry waits to see whether the warnings about systemic risk will lead to restrictions — or whether the focus on venue design will open the door for perpetuals in regulated markets.
