The systemic-risk debate over perpetual futures is aimed at the wrong target
The authors argue that systemic risk in perpetual futures markets is a result of venue-specific design choices rather than the nature of the contracts themselves. They suggest that regulatory focus should be on clearing and default management rather than banning the instruments.
Perpetual futures are entering regulated markets, and the objection to them is serious: retail-driven, high-leverage instruments will import systemic risk. But the critique is aimed at the wrong target. Systemic risk in a derivatives market is a property of the venue on which the perpetuals are traded, not the contract. The risk is set by venue choices: leverage caps, margin, funding design, default management. None inherent to a no-expiry contract.
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