Single-stock perps look like pointiest horn of a bull market

{"text":[[{"start":4.7,"text":"Anthropic is going ahead with its initial public offering. But why wait? So-called perpetual futures have become a popular way for investors — or at least, those outside the US — to bet on the valuation of companies even if they aren’t yet publicly traded. Now, regulators are considering allowing investors in the US to access these gizmos too, at least for listed companies. That will be a better deal for exchanges and brokers than for the investors themselves."}],[{"start":33.56,"text":"Perps, initially popular among crypto traders for their leverage and liquidity, don’t have a settlement date like regular futures. Instead, the investor’s account is credited or debited regularly to reflect shifts in the price of the underlying asset, as happens with a financial swap."}],[{"start":50.52,"text":"Wrapping a perpetual of any kind around a stock, which already has no end date, feels like a case of market participants chasing their own tail. The main attraction, though, is how easy it is to add leverage. A survey of Robinhood users last month by Mizuho analysts revealed nine out of 10 were likely to trade single stock perps if the broker offered them."}],[{"start":71.92,"text":"This is great news for providers of the product. Along with the platforms applying to the Commodity Futures Trading Commission to trade the products, including Coinbase and predictions market pioneer Kalshi, brokers with a strong following among younger retail traders stand to profit whether markets rise or fall."}],[{"start":null,"text":"

"}],[{"start":90,"text":"It doesn’t take a financial mastermind to see how these can go wrong. A levered bet on a soaring stock is the ultimate bull market product, but is painful when markets swing wildly. At, say, five times levered, the holder of a perp betting on Nvidia to rise loses almost half their money if the chipmaker falls 9 per cent, as it nearly did at one point on Monday."}],[{"start":112.24,"text":"Moreover, when the deposit backing a perp is wiped out, the contract is closed automatically, freeing the seller to dump any stock they were holding to hedge the bet. That’s how a slight slide in bitcoin a year ago, and its ensuing effect on a slew of highly leveraged perp contracts, produced a 15 per cent tumble in the cryptocurrency. But while what goes on in crypto rarely affects the wider world, swings in US stocks can rattle global investor confidence."}],[{"start":139.68,"text":"Perps are going mainstream just as the regulator seems least well placed to assess them. The two main US market watchdogs, which would normally have 10 commissioners altogether, currently have just three. Michael Selig, the lone overseer of the CFTC, is pro-perp, which has embroiled his agency in lawsuits brought in June by futures exchange CME Group, and then last week by options giant Cboe Global Markets and market maker Citadel Securities."}],[{"start":168.56,"text":"That leaves perps somewhat in limbo for US investors while these legal challenges to the CFTC’s authority drag on. Regulatory uncertainty is the biggest hurdle to wider adoption, according to a survey last month by Crisil Coalition Greenwich, a markets analytics firm. Since perps are clearly a creature of a bull market showing signs of strain, the question is whether investors will still be interested when they actually arrive."}],[{"start":197.5,"text":""}]],"url":"https://audio.ftcn.net.cn/album/a_1794453760_1648.mp3"}