Exchanges Fear Perp Futures Flood

Major US stock exchanges are experiencing significant stock price declines, with some falling by up to one-third. This downturn is attributed to fears that these institutions may have missed out on the growing trend of perpetual futures, or 'perps.' The concern intensified recently when US regulators granted approval for Kalshi, a predictions market, to offer bitcoin-based perpetual futures.

This marks the first time US regulators have approved such a product, reversing a previous skeptical stance. Perpetual futures are derivatives that do not expire, eliminating the need for actual asset delivery, which makes them easier to trade. Initially popular in the crypto space, they are now being linked to other assets like oil. Investors are worried that the increased availability of perps could undermine exchanges as primary trading venues for equity indices, oil, and other commodities.

Exchanges are actively responding to this evolving market. Cboe Global Markets launched a crypto product called a "continuous future" last year, and Intercontinental Exchange (ICE) partnered with offshore crypto platform OKX to offer perps on its Brent oil products. CME Group, however, has taken a different approach by suing the Commodity Futures Trading Commission (CFTC). Despite these challenges, exchanges historically adapt to new trends and may still find ways to participate in the perp market.