Odaily reported that the Division of Market Oversight of the U.S. Commodity Futures Trading Commission has announced the issuance of an exemptive letter to designated contract markets, or DCMs. The letter allows those markets to convert existing digital commodity futures contracts that use a “perpetual-like” structure into true crypto perpetual futures contracts.
The policy is described as an extension of prior regulatory clarification. According to the notice, it applies to digital commodities such as Bitcoin that have deep, active and continuous spot market trading. The focus of the exemptive letter is the conversion of existing contract structures, rather than the creation of an unrelated product framework.
Existing Contracts May Remove Their Expiration Dates
Under the document, DCMs may remove the expiration dates from existing contracts after satisfying specified conditions. By doing so, a digital commodity futures contract with a perpetual-like design can be transformed into a true perpetual futures contract. The document frames the change around already listed contracts and sets conditions for how that change must be handled.
The CFTC document requires exchanges to solicit feedback from users who hold positions in the affected contracts. Exchanges must also provide advance notice before the conversion and give users an opportunity to close their positions. These requirements place existing position holders directly within the conversion process and require communication before the contract’s expiration feature is removed.
Risk Disclosure and Filing Obligations
The exemptive letter also requires sufficient risk disclosure. In addition, exchanges must ensure that no other key contract terms are modified as part of the conversion. In other words, the relief concerns the removal of the expiration date under the stated conditions, while other important contract terms must remain unchanged.
On the compliance side, exchanges must submit amended filings under CFTC Rule 40.5 or Rule 40.6 and complete the relevant compliance certification. Only after meeting the stated requirements, submitting the necessary amendments and completing certification may a designated contract market convert an existing perpetual-like digital commodity futures contract into a true crypto perpetual futures contract.