SGX Bitcoin and ether Perpetual futures have become increasingly popular since their introduction two weeks ago, and their growth means new liquidity rather than cash redirected elsewhere, said Singapore Exchange Holding Company president Michael Singh.
The product is a cryptocurrency derivative that allows institutional investors to speculate on the price of an asset without an expiration date, and nearly 2,000 lots were traded on November 24th, with a notional amount of approximately $32 million. The cumulative transaction value to date has reached $250 million.
Importantly for the exchange, that amount appears to be new money coming into the system, rather than money diverted from alternative investments or other exchanges. Futures trading gradually builds liquidity and price discovery, rather than extracting trading volume from competing desks such as over-the-counter trading.
“Similar to the launch of Rupee/CNH futures, it creates a new market without disrupting OTC,” Singh said in an interview, adding that early volume trends indicate interest from institutional hedge funds with experience in futures trading, along with active participation from crypto-native players.
Permanent or purp allows investors to bet on the future price of an asset without the hassle of rolling over the position when a future expiration occurs. The strategy has been popular with crypto traders for years, but a lack of regulated markets, especially in Asia, has kept financial institutions on the sidelines.
“We are aiming to become the mother contract for the Asian time zone,” Singh said.
In other words, the exchange aims to establish BTC/ETH purp as the benchmark contract during Asian trading hours, and the go-to reference for pricing, settlement, and liquidity in the time zone.
Financial institutions are chasing arbitrage
Singh said the perpetual product was introduced to meet the growing demand from institutional investors for regulated contracts for basis trading, also known as cash-and-carry arbitrage.
“It starts with the voice of the customer… Institutional investor interest is now in basis trading, buying spot/ETFs and hedging with futures. Up to 90% of Bitcoin ETF interest is basis traders, not outright longs,” Singh told CoinDesk. “Customers want short-term securities on regulated exchanges like SGX, not noisy 90-day futures.”
Basis trading is a two-legged strategy that buys a virtual currency (or an appropriate ETF) in the spot market and simultaneously sells futures to offset the price difference between the spot and futures/perpetual futures prices.
Arbitrage has long been popular among crypto-native traders, and PERP was invented by BitMEX about 11 years ago, but financial institutions have remained on the sidelines due to the lack of a regulated perpetual futures market, especially in Asia.
SGX is now calling for greater participation by institutional investors, arguing that regulated contracts provide a reliable venue for conducting basis trades without offshore risk.
risk management
Futures remain one of the most popular crypto products. Still, they have been controversial since the October 8 crash, when platforms like HyperLiquid, a decentralized exchange (DEX) for perpetual futures trading, automatically deleveraged positions, wiped out profitable bets and socialized losses to protect exchanges.
One theory is that basis traders saw the short leg of futures automatically deleveraged on October 8th and became short sellers in the spot market, contributing to the price decline seen in November.
SGX said regulated criminals employ different risk management practices.
“There is no high-leverage automatic clearing here. This is an OTC structure without proper clearing. We set margins conservatively and the broker refills on behalf of the customer,” Singh explained.
“Basis trading (spot $1 long = indefinite $1 short) position is stable, and this model has been proven for many years in the government bond and currency basis markets.”
When asked about plans for additional products such as options and altcoin perpetual currencies, Singh emphasized that the immediate priority is to build liquidity and confidence in BTC and ETH perpetual currencies before expanding.
He noted that while deep liquidity is needed for options to work effectively, client interest is also showing up in the S&P 500 and perpetual interest rates. He added that the broader product roadmap reflects what is currently available in the unregulated market, but for now, the company remains focused on successfully delivering on its core contracts.
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