The CFTC has sparked a potential revolution on Wall Street. Forex stocks are falling

Regulatory approval of perpetual Bitcoin futures has sent stock prices on exchanges lower, raising concerns that a new wave of trading products could threaten Wall Street’s survival.

CME GroupThe company, known for its derivatives and futures trading platform, fell more than 2% in Tuesday trading. The stock has fallen more than 8% over the past two days, on track to record its biggest weekly decline since 2020.

CBOE Global MarketThe exchange and derivatives network plunged more than 8% in Tuesday trading. This brings the loss to more than 17% this week, which is also the biggest weekly decline since 2020.

Parent company of the New York Stock Exchange intercontinental exchange It fell more than 1% on Tuesday and is down more than 3% for the week. Nasdaq Shares fell more than 5% during the session, sending the stock into an all-time red week.

Last week, the Commodity Futures Trading Commission approved perpetual futures (a type of futures-type contract with no expiration date) for Bitcoin trading on Karshi. This tool, known as “perps” for short, is popular among overseas retail traders.

Investors are concerned that the CFTC will next give the green light to trading in perpetual futures in other asset classes. That could increase competition from traditional exchanges that have long dominated Wall Street.

Barclays analyst Ben Budish told clients in a note Tuesday that “there is concern that criminals could infiltrate equity products and replace them with CME/CBOE S&P products.”

Budish said perpetual futures could pose a competitive challenge for certain products targeted at retail investors. But analysts said a comparable product already exists in the U.S. and so far there has been no major change in the way retail investors trade.

Despite the recent backlash, RBC analyst Ashish Sabadra said competitive risks can be managed because there are “fundamental” differences between perpetual future mechanisms and those offered by exchanges. Sabadra said perpetual futures could face leverage limits by clearinghouses as a means of mitigating risk, and institutional benefits are limited.

In other words, investors “attack first and ask questions later,” said Jay Woods, chief market strategist at Freedom Capital Markets.

“News of a minor setback (may) have merit,” Woods said. “But this seems like a huge overreaction to me.”

David Krakauer, vice president of portfolio management at Mercer Advisors, said perpetual futures are not the only challenge facing exchange providers in the eyes of traders.

Krakauer said investors are concerned that financial technology companies and other platforms will start offering products that rival traditional exchanges. Additionally, he said, stakeholders in these stocks wonder if the rise of prediction markets will draw attention away from traditional asset classes.

Karshi CEO Tarek Mansour allayed investor concerns, saying the prediction market platform has received approval and aims to build a perpetual futures product beyond Bitcoin alone.

“Kalshi is starting with Bitcoin perpetual futures and we’re going to expand from there,” Mansour said Monday on CNBC’s “Squawk on the Street.”

Mansour said criminal organizations see a transaction volume of more than $90 trillion annually, making it “one of the largest asset classes on the planet today.” He added that despite interest in the product, there was no participation from US investors due to regulatory hurdles.

“The demand has been very clear in the U.S. over the last few years,” Mansour said. “People want it here. Institutions want it here.”

Indeed, Piper Sandler analyst Patrick Morley told clients in a note last month that HyperLiquid’s perpetual futures platform, Trade (XYZ), has yet to take significant market share from legacy operators. For example, the trading volume of Trade(XYZ) is S&P500 Banks discovered oil from the Intercontinental Exchange and CME.

robin hood CEO Vlad Tenev said in an interview Tuesday on CNBC’s “Squawk on the Streets” that the prospect of bringing criminals to the United States is “very attractive.”

Tenev said U.S. traders should be able to use perpetual futures without going through unregulated platforms accessed by virtual private networks, also known as VPNs. US crypto investors have been known for years to trade Bitcoin perpetual futures through offshore accounts.

— CNBC’s Davis Giangiulio, Sean Conlon and Tanaya Macheel contributed to this report.