CFTC on Tuesday approved the listing of perpetual futures on individual US stocks. This is the first such approval in the country. Previously, Americans traded such contracts only on foreign venues.
A perpetual future is a contract on the price of an asset with no expiration date. A position can be held indefinitely as long as there is enough margin in the account. Kalshi, which received the approval, is an American exchange for event-outcome contracts.
Why this matters to a trader. US stocks are now available with leverage up to 6:1 within a regulated venue. Along with leverage, the risk of forced liquidation also grows.
What exactly was approved for trading?
In Kalshi's application dated September 18 — 58 contracts. Trading runs from Sunday evening to Friday, Eastern Time US.
- 55 stocks — including Apple, Tesla, Nvidia and Microsoft
- Alibaba depositary shares — another contract on the list
- Two funds — on the S&P 500 and Nasdaq-100
What the holder gets. Only the price movement of the security. Not the shares themselves, nor dividends, nor voting rights.
How is the price kept near the stock's price?
Regular payments between the parties pull the contract toward the stock price. The one whose side is more expensive than the market pays.
Key point: in the Coinbase Derivatives model, the rate of such payments reaches 0.10% per hour. This is the direct cost of holding a position.
Why didn't the CFTC put it to a vote?
The approval went through under Regulation 40.3, which is called "silent." A product is considered approved if the commission does not prohibit it within 45 days.
- Dual oversight. CFTC Chairman Michael Selig noted that such contracts also fall under SEC oversight.
- Restriction by venue. That is why listing is available only to exchanges registered with both agencies.
- The May precedent. The CFTC used the same route to let through a perpetual Bitcoin future on Kalshi.
What risk does the trader face?
Kalshi allows opening a position by depositing 15.5% of the stock's value. Benjamin Schiffrin, director of securities policy at Better Markets, compared the terms of different markets on November 2.
- 20:1 — leverage on such contracts abroad
- 2:1 — for SEC-approved exchange-traded funds on a single stock
- 6:1 — the cap for American perpetuals
The cost of a mistake. According to Schiffrin's calculations, a 20% drop in the security fully liquidates a position with 5:1 leverage. There isn't enough margin, and the position is forcibly closed.
What happens next?
The dispute is already in court. CME Group is suing the CFTC over the approval of perpetual crypto contracts.
Intercontinental Exchange, the owner of the New York Stock Exchange, is preparing its own launch. It is convenient to keep reports and meetings on US securities in the economic calendar.
Adding volume with leverage because your account is small?
The arithmetic is familiar. The deposit is small, so you stretch the notional with leverage. One 20-percent candle on the security wipes out the position entirely. Working volume can be increased differently, without raising credit risk against your own money. A prop firm opens an account for a trader on its own capital after a paid selection process and shares a percentage of the result. It makes more sense to work through this chain now, while new contracts are just coming onto the exchanges.