Arjun Sethi

There’s still a lot of misinformation about perpetual futures floating around. Let’s start with the premise that a futures contract has to expire. Where does it say that in the statute? Calling a perp a swap doesn’t create a different risk to the financial system. What matters is how the contract is margined, cleared and managed when someone defaults. If a perp can operate with the same safeguards as a traditional future, why should the absence of an expiration date exclude it from that framework? Then there’s the claim that perps necessarily come with massive leverage and auto-deleveraging. That's just totally wrong. You absolutely can build a perp with reasonable leverage and no ADL. You could also build a quarterly futures contract with massive leverage and auto-deleveraging. Those are design choices. I’m in favor of perps because they can address real inefficiencies in existing markets. An oil ETF could maintain its exposure without the trading costs and slippage of predictably rolling futures. A stock perp could pass the economic benefit of hard-to-borrow demand to the long holder—value that rarely reaches retail shareholders today. Producers still need traditional futures to hedge forward production. Perps complement those contracts. List both. Let people use the instrument that meets their needs. More from my discussion with @TheStalwart and @tracyalloway on Odd Lots: youtube.com/watch?v=QidpqykD…