The highly popular perpetual futures, a staple in the global crypto trading landscape, have officially landed in the US, sparking a mix of excitement and trepidation among Wall Street institutions. With an estimated annual volume of $90 trillion, according to Bank of America, these contracts have become a core component of digital asset trading. Perpetual futures, unlike traditional futures contracts, do not have an expiration date, and traders are not required to close or roll over their positions, instead making periodic funding payments to keep the contract price aligned with the underlying asset.
Following regulatory approval from the Commodity Futures Trading Commission (CFTC) for companies like Kalshi and Coinbase to offer these contracts, interest in perpetual futures is growing. However, large financial institutions are adopting a wait-and-see approach, studying the product rather than launching major initiatives.
Proprietary trading firms, market makers, and newer clearing firms are more likely to be the first movers, as they have more freedom to test new markets and accept operational risks. The potential applications of perpetual futures extend beyond speculation, as they could help traders manage weekend risks and provide a source of price discovery. A liquid 24-hour perpetual market could enable firms to adjust positions in real-time and use weekend prices to estimate where traditional futures may reopen. Despite the potential benefits, regulatory questions and competitive disputes are emerging, with incumbent exchanges like CME challenging the CFTC's treatment of certain perpetual contracts.
As the market continues to evolve, trading firms see a product they understand, regulators see a market moving onshore, and exchanges see an opportunity to capture new volume. However, the largest banks are unlikely to take the lead, instead waiting for the rules, liquidity, and infrastructure to mature.