Comment Text:
Oppose Perpetual Derivatives – Require Mandatory Settlement
The introduction or legitimization of "perpetual derivatives" in regulated U.S. markets represents a dangerous move toward unchecked synthetic leverage with no final accountability. These instruments—unbound by expiration—allow infinite short exposure to assets without ever settling to delivery, creating systemic distortion, undermining price discovery, and opening the door to market manipulation and phantom supply.
Perpetuals are anti-settlement by design. Without an expiry date, there is no forced reconciliation between the derivative and the underlying. This enables:
Naked short selling in perpetuity, where synthetic contracts suppress price without delivery.
Hidden leverage, especially when layered into opaque swaps and rehypothecation chains.
Distorted market signals, as the underlying asset price becomes uncoupled from actual supply and demand.
This is not theoretical. We’ve seen this with equity total return swaps (Archegos), energy derivatives stress (EU/LDI crisis), and equity-based perpetual exposure in microcap stocks like GME and MMTLP, where synthetic dilution was never reconciled.
The solution is not looser derivatives—it's tighter enforcement.
I am calling on the CFTC to:
-Ban perpetual derivatives that do not expire or settle into the physical/underlying.
-Require mandatory physical or cash settlement at expiration for all derivatives.
-Audit synthetic exposure accumulation using LEI and trade repository data across all affiliates and counterparties.
-Require transparency in all open interest exposure over time—rolling should not hide unresolved short positions.
-Bar perpetuals from being used as a workaround to bypass position limits, delivery obligations, or short-sale disclosure.
-Require UBS to disclose & settle their swaps from Credit Suisse
Letting these products proliferate before a full-scale market unwind is financial negligence. We need less financial abstraction, not more.
Respectfully,
A concerned market participant
