Perpetual contracts “grab jobs” are worried too much, and Bank of America is bullish on the three major US exchanges

The Zhitong Finance App learned that Bank of America analysts said that after perpetual contracts caused competitive disruptions, they were “more optimistic” about the three major US exchange operators, and pointed out that these companies still have an advantage in their market position and customer base.

Earlier this year, shares of the Chicago Board Options Exchange (CBOE.US), Chicago Mercantile Exchange (CME.US), and Intercontinental Exchange (ICE.US) fell sharply due to the impact of offshore cryptocurrency exchanges and competitive products in the forecasting market. Although these stocks have rebounded from mid-year lows, they are still far below their pre-sell-off highs.

Cboe: The sell-off brought about by competing products was “overreacted”

The market's concerns about competition are largely due to the prediction market platform Kalshi launching gold, silver, and cryptocurrency perpetual futures and submitting applications to regulators to launch leveraged stock bets. So-called “perps” (perps) allow traders to bet on the current price of an asset without being limited by the expiration date of traditional futures contracts.

The Chicago Board Options Exchange stock price fell by about 30% cumulatively from mid-May to the end of June. Bank of America analysts, led by Craig Siegenthaler, said that this round of decline was an “overreaction,” and pointed out that the company had a structural advantage in the stock options sector and that its customer base was dominated by professional investors, which reduced the risk of competing products from other exchanges stealing the business.

CME: Lawsuits may bring a “win-win”

The Chicago Mercantile Exchange is filing a lawsuit over how US regulators handle perpetual futures. Siegenthaler believes that regardless of the outcome of the lawsuit, CME is likely to usher in a “win-win situation.”

If the Chicago Mercantile Exchange wins the case, the court finds that perpetual contracts are swaps rather than futures, which could slow the pace of expansion of competitors such as Kalshi and Coinbase. Coinbase is the largest cryptocurrency exchange in the US. If the Chicago Mercantile Exchange loses the lawsuit and perpetual contracts continue to be treated as futures in the US, then the company will be able to take advantage of its existing exclusive rights to S&P 500 and Nasdaq 100 futures.

Intercontinental Exchange: Investment layout “betting on both sides”

Siegenthaler said the Intercontinental Exchange franchise is protected because the group has strong institutional franchises in the commodity futures sector and has invested in the disruptive offshore cryptocurrency exchange OKX and prediction market platform Polymarket.

He pointed out that the collaboration with OKX and PolyMarket enabled the Intercontinental Exchange to “bet on both sides.” This means that even if the cryptocurrency and prediction markets erode the revenue of traditional exchanges, the Intercontinental Exchange, as the parent company of the NYSE, can reap rewards from its venture capital in this field.

Siegenthaler also said that the Intercontinental Exchange's move “looks quite sensible.”