CFTC Chair Michael Selig is defending the U.S. approval of perpetual futures, or ‘perps’, emphasizing the need for domestic regulation of these international products.
Selig dismissed concerns about retail investor risks, arguing that options are equally complex and that proper disclosures and broker evaluations will be in place. The CFTC’s recent approval for Kalshi to offer bitcoin perps has seen significant trading volume.
CFTC Chair Defends Approval of 'Perps' in the U.S., Dismisses Retail Risk Concerns
CFTC Chair Michael Selig addresses the controversial decision to allow perpetual futures trading domestically, emphasizing regulatory oversight and dismissing fears of retail investor harm.
Published: June 11, 2024
Key Takeaways
- CFTC Chair Michael Selig asserted the need to develop perpetual futures domestically for robust regulation.
- Perpetual futures ("perps") are futures contracts without an expiration date, allowing speculation on asset prices.
- Selig refuted claims that retail consumers would be disadvantaged by the complexity of these contracts.
Commodity Futures Trading Commission (CFTC) Chair Michael Selig has robustly defended his agency's decision to approve perpetual futures, or "perps," for domestic trading. In a recent appearance on CNBC's "Fast Money," Selig emphasized the strategic importance of bringing such internationally popular financial products under U.S. regulatory oversight.
"Incumbents will always fear the future," Selig stated, acknowledging the apprehension surrounding new financial instruments. However, he stressed that the goal is to "onshore products that are being developed internationally to ensure they can be made safely under robust regulations." He further elaborated, "It's time to approve regulated futures contracts that have no expiration date. We're going to make sure the product's available, but it's well regulated here in the U.S."
The CFTC's approval in late May for the prediction market platform Kalshi to offer bitcoin perpetual futures marked a significant first for the U.S. market. Perpetual futures, which differ from traditional futures by having no expiration date, allow traders to speculate on an asset's price movements without direct ownership. Kalshi has since broadened its perps offerings to include other cryptocurrencies, demonstrating substantial market interest with over $3 billion in notional volume during just over a week of beta testing.
This regulatory green light has not been without its critics. Terrence Duffy, CEO of CME Group, previously voiced strong opposition, citing concerns over the high leverage associated with these contracts. However, Selig pushed back against these criticisms, arguing against a paternalistic approach to financial regulation.
"The notion that we should be paternalistic and allow for one type of product, because it's easier to understand, I think that's frankly a misunderstanding itself, because, of course, options are very complicated," Selig explained. He reassured that the CFTC is committed to ensuring "proper disclosure" and that brokers will be responsible for evaluating customer suitability.
Kalshi CEO Tarek Mansour also weighed in, noting that the maximum leverage offered by his platform, around six times, is actually lower than that on some CME futures contracts. Selig further dismissed insinuations that the CFTC's decision was influenced by political pressure from the Trump administration, calling such claims "absolutely absurd."
