The highly popular perpetual futures trading product, a staple in the crypto market, is now entering the US regulated market, sparking a debate among Wall Street institutions about its potential impact. With an estimated annual volume of $90 trillion, according to Bank of America, this product has become a core part of global crypto trading.
Recently, the Commodity Futures Trading Commission (CFTC) granted approval to Kalshi and Coinbase to offer regulated perpetual futures in the US. However, despite the growing interest, large financial institutions are adopting a cautious approach, choosing to study the product rather than launching it immediately. In contrast, proprietary trading firms, market makers, and newer clearing firms are more likely to be the first movers. The main reason for this cautious approach is the stricter capital rules, client obligations, and reputational risk that large banks face.
Meanwhile, the potential use cases for perpetual futures extend beyond speculation, as they could help traders manage weekend risk and provide a hedge and source of price discovery. However, the lack of depth and regulatory clarity are major concerns, with a regulatory fight taking shape over the treatment of perpetual contracts as futures or swaps.
As the market continues to evolve, it remains to be seen how Wall Street will embrace this new product, but for now, the largest banks are unlikely to take the lead.