According to Don Wilson, CEO of DRW, the common perception of perpetual futures is misguided. He asserts that these financial products, also known as 'perps,' are simply futures contracts without an expiration date. The characteristics often associated with crypto perpetuals, such as high leverage and auto-deleveraging, are a result of how some crypto exchanges have chosen to implement these products, rather than inherent features of the contracts themselves. Wilson's comments come at a time when interest in introducing perpetual futures to regulated U.S.
markets is growing, with several exchanges and market participants exploring their launch beyond the crypto space. Unlike traditional futures markets, crypto exchanges operate continuously and utilize digital collateral, allowing for real-time margin requirement calculations and alternative liquidation mechanisms. Wilson argues that these design choices should not be confused with the nature of perpetual futures.
Instead, he believes that digital payment systems can improve risk management by enabling real-time settlement and reducing the need for large upfront margin requirements. The true innovation of perpetual futures, according to Wilson, lies in their ability to eliminate the need for repeated contract rolls, thereby reducing transaction costs and allowing positions to more closely track the futures curve. Wilson urges regulators to focus on the economic substance of perpetual futures rather than their legal labels, emphasizing that they should be treated as futures, not swaps.
Ultimately, he advocates for the availability of perpetual futures across a broader range of markets, including commodities, securities, and crypto, as a tool for price discovery and risk management.