Comment Text:
Perpetual contracts, such as perpetual futures or swaps, are derivatives that let traders speculate on an asset’s price without owning it and without a set expiration. Though common in crypto markets, applying these to stocks raises serious concerns. Their indefinite duration and high leverage make them ripe for manipulation. Traders could hold large positions to distort stock prices which causes misleading market signals and undermining of price discovery. This is not just theoretical, similar products like Contracts for Difference (CFDs) have been banned in the U.S. due to misuse and abuse.
These contracts also risk increasing stock market volatility. Their leverage magnifies small price movements, encouraging speculative, short-term trading that can destabilize markets. Retail investors, often attracted by the promise of high returns, are especially vulnerable, given the complexity and potential for losses that exceed initial investments. Regulators like the UK’s FCA have already warned of similar dangers with CFDs.
Moreover, most perpetual contracts are traded over-the-counter, with limited transparency or oversight. This makes enforcement difficult, especially across borders, and complicates the creation of consistent regulatory standards. The systemic risk is real: widespread use could lead to liquidity issues, contagion, and destabilization. We’ve seen this with leveraged derivatives in past crises.
In short, bringing perpetual contracts into stock markets could amplify manipulation, volatility, and systemic risk... especially for retail investors. Any consideration of these instruments must come with serious regulatory safeguards. Let’s not wait for disaster before acting!
