Odaily reported that the Division of Market Oversight of the U.S. Commodity Futures Trading Commission, or CFTC, has announced the issuance of a relief letter to designated contract markets, known as DCMs. The letter allows eligible trading venues to convert existing digital commodity futures contracts that currently use a perpetual-like structure into true crypto perpetual futures, referred to in the document as true perpetual futures.
Scope Covers Digital Commodities With Deep Spot Markets
The policy is described as an extension of prior regulatory clarification. Its scope is expressly tied to digital commodities such as Bitcoin that have deep, active and continuous spot market trading. The CFTC’s Division of Market Oversight is therefore addressing a specific category of existing digital commodity futures contracts: contracts that already resemble perpetual products in structure, but still need a formal pathway to become true perpetual futures.
Under the document, DCMs may remove the expiration dates from existing contracts after satisfying specified conditions. Once that change is made, the contracts can be converted into true perpetual contracts. The conversion described by the CFTC centers on the expiration mechanism of the existing futures contracts, rather than a broad rewrite of the contract design. The exchanges must ensure that other key contract terms are not changed as part of the conversion process.
Required Steps Include User Feedback, Notice and Risk Disclosure
The relief letter lays out several requirements for DCMs. Exchanges must seek feedback from users who hold positions in the affected contracts. They must provide advance notice before the conversion takes place and give users an opportunity to close their positions. They are also required to provide sufficient risk disclosure. In addition, the exchanges must confirm that no other key contract terms are modified while the expiration date is removed.
The document further states that exchanges must submit amendments under CFTC Rule 40.5 or Rule 40.6 and complete compliance certification. As a result, a DCM seeking to convert an existing digital commodity futures contract with a perpetual-like structure into a true crypto perpetual futures contract must follow both operational requirements for users and formal filing requirements with the CFTC.