Perpetual futures incite bad behavior, says CME CEO Terry Duffy

Summary

CME Chairman and CEO Terry Duffy criticizes perpetual futures as dangerous, casino-like products that incite bad behavior through their funding rate mechanism, creating excessive leverage and systemic risk. He compares them to the 2007 housing crisis and argues they lack forward hedging credibility, unlike traditional futures markets.

• Duffy calls perpetual futures a '2007 for retail' in terms of leverage and auto-liquidation risk.
• He explains that perpetuals' funding rate can incentivize bad behavior by forcing winning traders to pay losing ones.
• Duffy argues perpetuals cannot be forward hedged credibly because they lack a future date of delivery or cash settlement.
• He asserts that traditional futures markets are essential for hedging risk in mortgages, gasoline, and US debt.
• Duffy rejects the notion that his opposition is self-dealing, stating he wants products that people need to trade, not casinos.