The introduction of perpetual futures into regulated markets has sparked concerns about systemic risk, but this criticism is misplaced. The risk is not inherent to the perpetual futures contract, but rather a result of the venue's design, including leverage limits, margin rules, and default handling. The real question is how a given venue is constructed, and whether it can handle defaults and liquidations in a way that prevents systemic risk.
Regulatory requirements, such as segregated funds and oversight, are essential, but the key to mitigating risk lies in the venue's design and its ability to manage defaults and liquidations. Institutions may not need perpetual futures as a replacement for traditional futures, but they can be useful for hedging delta, and their liquidity is a valuable asset. The debate over perpetual futures is not about their inherent risk, but about how they are implemented and managed.