The introduction of perpetual futures to regulated markets has sparked concerns about systemic risk, but this critique is misplaced. The risk is not inherent to the contract, but rather a result of the venue's design, including leverage caps, margin, funding design, and default management. The real issue is not whether perpetuals belong in regulated markets, but how a given venue is constructed. Regulatory requirements are necessary to establish a baseline, but it is the venue's handling of defaults under stress that is crucial.
Institutions may not want perpetuals as a replacement for regulated futures, but they can be used for delta hedging, and their liquidity is a valuable asset. The key to safe usage is institutional-grade default management, which contains systemic risk. The debate surrounding perpetuals is not about their inherent danger, but about how venues handle defaults during times of market stress.
A well-designed venue can contain failures, while a poorly designed one can transmit them, leading to systemic risk.