CFTC Launches Equity Perps Trading, Faces Lawsuit Hours Later

CFTC Greenlights Equity Perpetual Futures, Faces Lawsuit Hours Later

The U.S. Commodity Futures Trading Commission (CFTC) has cleared the way for perpetual futures tied to individual U.S. stocks to be traded on exchanges registered with the agency. However, a coalition backed by Cboe and Citadel Securities has swiftly filed a lawsuit challenging the decision, asserting the CFTC lacks the authority to permit such trading.

In a statement released November 3, CFTC Chairman Michael Selig confirmed the commission’s approval of perpetual futures on individual equity securities, commonly known as equity perps, under its Regulation 40.3. These instruments have been classified as security futures products, falling under both the Commodity Exchange Act and federal securities laws, as per the Commodity Futures Modernization Act of 2000.

Selig stated that this move would provide U.S. traders with access to products popular in international markets, eliminating their reliance on offshore platforms. He characterized perpetuals as valuable tools for risk management and price discovery, while emphasizing the necessity of robust safeguards.

The CFTC’s statement indicated that exchanges wishing to list single-stock perps must also file a notice with the Securities and Exchange Commission (SEC) to trade security futures, establishing a dual oversight framework. Selig connected this decision to a Memorandum of Understanding (MoU) signed earlier this year between the CFTC and SEC, aimed at enhancing inter-agency coordination.

“Earlier this year, the CFTC took historic action in this regard by approving the listing of the first true Bitcoin perpetual futures contract on a CFTC-regulated exchange,” Selig’s statement read. “Today’s announcement builds on that milestone by extending the availability of the perpetual futures contract instrument in the US beyond digital commodities and into traditional securities.”

Shortly after the CFTC’s announcement, a group identifying itself as the Capital Markets Alliance filed a lawsuit. The group contends that the financial regulator has contravened congressional legislation and “invited a parallel synthetic market in US stocks” that it claims would operate beyond the SEC’s exclusive jurisdiction.

A CFTC spokesperson described the lawsuit as “troubling” interference with markets under the agency’s purview, according to Reuters. The spokesperson added that U.S. markets should be governed by law, not by litigation campaigns intended to “block innovation.”

This is not the first instance of such a dispute. In June, CME Group announced its intention to sue the CFTC over the approval of Bitcoin perpetuals, which Selig referenced in his statement. At the time, CME CEO Terrence Duffy argued that perpetual contracts should be classified as swaps under the Dodd-Frank Act, not futures, and that providers should engage with the Chicago Mercantile Exchange due to its exclusive benchmark licenses.