Comment Text:
Perpetual contracts—such as perpetual futures or swaps—are derivatives that let traders speculate on asset prices without owning the underlying asset or dealing with expiration dates. While common in crypto markets, their introduction to stock markets raises serious concerns. The lack of expiry, combined with high leverage, makes them especially vulnerable to manipulation. Traders could hold large positions indefinitely, distorting prices and undermining true price discovery. This isn’t theoretical—similar products like Contracts for Difference (CFDs) have already been banned in the U.S. due to their susceptibility to abuse.
Beyond manipulation, perpetual contracts could increase market volatility. High leverage amplifies even minor price moves, incentivizing speculative, short-term strategies that destabilize markets. Retail investors—often drawn by accessibility and potential gains—are particularly exposed. These instruments are complex, risky, and can lead to losses far beyond initial investments. Regulators like the UK’s Financial Conduct Authority (FCA) have flagged similar risks with CFDs, noting that most retail traders lose money.
Regulatory oversight is another major challenge. Many perpetual contracts are traded over-the-counter (OTC), lacking the transparency and safeguards of exchange-traded instruments. Cross-border trading and inconsistent international standards make enforcement even harder. Their lack of standardization further complicates regulation. From a systemic risk standpoint, widespread adoption of perpetuals in stock markets could echo past derivative-driven crises—triggering liquidity shocks, contagion, and broader instability.
In sum, perpetual contracts bring significant risks: price manipulation, volatility, retail investor harm, and systemic threats. Their opaque, under-regulated nature makes them particularly dangerous. If introduced to stock markets, they must be met with strong, proactive regulation. This issue demands attention—no more kicking the can.
