U.S Perpetual Futures Extend to Individual Equities

In my inaugural remarks, I directed the CFTC to use the tools at its disposal to onshore perpetual derivative products so that they can flourish in the U.S., subject to appropriate safeguards.[2] Earlier this year, the CFTC took historic action in this regard by approving the listing of the first true bitcoin perpetual futures contract on a CFTC-regulated exchange.[3] This announcement builds on that milestone by extending the availability of the perpetual futures contract instrument in the U.S. beyond digital commodities and into traditional securities. This expansion marks a significant step towards allowing U.S. market participants, consistent with applicable law, to avail themselves of the advantages of perpetual futures that have led to their emergence as widely sought tools for risk-management and price-discovery. I believe that bringing these types of innovative products into our regulated markets ensures that American investors and traders can access these products within the protections of the CFTC’s proven regulatory framework, rather than being forced to turn to offshore, and often unregulated, venues.

The Equity Perps were deemed approved by the Commission, pursuant to Commission Regulation 40.3, as security futures products under the Commodity Futures Modernization Act of 2000 (the “CFMA”). The contracts are thus subject to the applicable requirements of the Commodity Exchange Act, the U.S. Federal securities laws, and the regulatory frameworks of both the CFTC and the SEC.

More than two decades ago, Congress enacted the CFMA to establish a framework for the joint regulation of security futures products. This framework recognized the complementary roles of the CFTC and SEC in overseeing American financial markets by providing a pathway for innovation at the intersection of the U.S. Federal commodity laws and the U.S. Federal securities laws. Earlier this year, and in furtherance of those principles, the CFTC and SEC entered into a historic memorandum of understanding (the “MOU”) to guide coordination and collaboration between the two agencies.[4]

The Equity Perps build on the foundation of the CFMA and the MOU. For too long, regulatory uncertainty left innovative products, such as security futures and equity perpetual futures, stranded in what SEC Chairman Paul S. Atkins has aptly described as a regulatory “no man’s land” due to a lack of harmonization between the agencies.[5] The CFTC and SEC have turned the page on that era, and are committed to delivering regulatory clarity for innovative products and a clear path to market, rather than more casualties of jurisdictional disputes.

The Equity Perps demonstrate the strength of the ongoing commitments of the CFTC and SEC to support lawful innovation, uphold market integrity, and ensure investor and customer protection through the harmonization of the CFTC’s and SEC’s regulatory frameworks.

I would like to thank the many dedicated staff at the CFTC for their continued hard work and collaboration with the SEC. And I look forward to building on today’s milestone as the CFTC works to ensure that the new frontier of finance is built in the United States of America.

Source: CFTC