Arthur Hayes, former head of BitMEX, published an essay arguing that perpetual futures and pooled loss-sharing changed retail trader behavior.

He explains how these instruments provided deep liquidity and high leverage, and how they reshaped market participation patterns.

Perpetuals as a market innovation

Hayes describes perpetual futures as instruments that supply continuous bilateral exposure without expiry, enabling sustained speculative flows.

According to him, exchanges offering these products created concentrated liquidity pools and made high leverage accessible to a broad retail audience.

Socialized losses and risk allocation

The essay highlights mechanisms where losses are redistributed among participants, reducing immediate counterparty pain but increasing systemic interdependence.

Hayes argues that such loss-sharing arrangements alter incentives for position sizing and risk management among smaller traders.

Impact on traditional derivatives

He asserts that perpetuals have migrated into equities and index trading, drawing speculative volume away from conventional futures markets and venues.

As a result, established exchanges face pressure to revise product offerings and infrastructure to remain competitive, Hayes writes.

Choices for incumbents

Hayes frames the situation as a strategic crossroads: legacy venues must adapt product designs or risk ceding market share to newer platforms.

He does not propose a single solution, but emphasizes the need for operational and commercial changes to align with evolving trader preferences.

Summary

The essay positions perpetual futures and socialized loss mechanisms as structural forces reshaping retail participation, liquidity distribution, and competitive dynamics across markets.

Market participants and venues, Hayes concludes, will need to adjust to these realities or face progressive marginalization.