The Commodity Futures Trading Commission said on Friday that perpetual futures contracts linked to cryptocurrencies can trade on registered U.S. platforms if they meet defined conditions, potentially bringing an instrument that has largely existed offshore into onshore markets.
Three CFTC divisions - the Division of Clearing and Risk, the Division of Market Oversight, and the Market Participants Division - issued a staff advisory on Friday that focuses on 24/7 trading, clearing and settlement. In a separate policy statement, the commission also said it will assess proposed contracts on a case-by-case basis.
The advisory provides guidance meant to assist registered firms that want to launch products that operate around the clock while remaining compliant with U.S. law. It lays out staff expectations for entities that seek to extend trading and clearing activities to a 24/7 model, and it reiterates the regulatory duties of several market participants under the Commodity Exchange Act and commission regulations.
Specifically, the advisory reminds designated contract markets, swap execution facilities, derivatives clearing organizations and futures commission merchants of their obligations when offering or supporting extended-hours activity. The divisions said the intent is to encourage responsible innovation in these markets while ensuring statutory and regulatory requirements are observed.
Staff emphasized that not all asset classes are equally appropriate for continuous trading and clearing. The advisory identifies differences across markets that should factor into any analysis of whether a 24/7 structure is suitable. According to the document, derivatives that reference crypto assets may be particularly amenable to continuous trading and clearing given their digital infrastructure and global accessibility.
By contrast, the advisory states that other derivatives markets - citing agricultural products as an example - may be less well suited for round-the-clock trading. Those markets can feature distinctive customer bases, regional characteristics and specialized trading and hedging practices that affect the appropriateness of a 24/7 model.
The CFTC's guidance and the commission's commitment to individual contract review together establish the framework under which some crypto perpetuals could be offered onshore, while leaving final determinations of particular contracts to subsequent case-by-case assessment.