Kalshi Launches Gold & Silver Perpetuals

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1:55single stocks, and that includes names, Tim, like Tesla, Apple, and NVIDIA. Few of those well-known names. Yeah, reading this from the Wall Street Journal, the contracts known as perps let traders bet around the clock and pile on leverage that amplifies their potential gains and losses with the lack of expiration date, further tightening the risk. Yeah, exactly. Calci plans to launch around 60 perps tied to popular ETFs and single stocks of companies with a market value of at least$100 billion. That's according to one of the people familiar with the matter. This is all we should point out due to reporting in the Wall Street Journal.

2:27There's more. The company also launching 24-7 CalC's perpetuals on gold and silver and said to be fully regulated by the CFTC. There's lots to talk about. Yeah, back with us, Udesh Jha, chief risk officer of the prediction market CalC, joining us from London. Jha just recently appointed this position a few months ago, coming from the derivatives marketplace over at CME Group. He was an MD and head of post-trade services since early 2020. He was there for about 16 years. Good to have you back on the program. When we spoke with you in July, we discussed how Kalshi created this tool that plots the future price of compute power.

3:03How do you think about this, perpetuals, gold and silver, and also potentially single stock perpetuals, sort of building on that?

3:14Udesh Jha:Thanks for having me. It's great to be on your show. So I think gold and silver are a very natural extension to our crypto perpetuals, which have gotten to a really good start. We've had about 45 billion of trades already on them. And gold and silver, which we launched yesterday, we are seeing some really encouraging signs in terms of the volume as well as open interest. But more importantly, I think why gold and silver? I think the macro story speaks for itself. They are a much bigger asset class than, let's say, crypto, 15 to 20 times the size of crypto. Gold, not just a store of value, but in today's day and age, with inflation coming in at rates higher than target for the last few years, I mean, one of the best hedge is to hold gold.

4:06Udesh Jha:And silver with its story around AI, data centers, and so on and so forth. But what we are doing is we are bringing that market broadly to the reach of folks who could not have afforded this type of trade. And what do I mean by that? We are perpetual, provide you much better liquidity because they are not spread across multiple contracts. The contract sizes are small. We trade 24-7. And most importantly, they avoid roll costs. If you want to hold gold and silver for a long period of time, which many want to hold, you don't have to go in and pay roll costs every month. So, there is a significant cost benefit.

4:50Udesh Jha:And some of these things, the size of the contract roll, have prevented a very large-scale adoption into this market. And that's what we are bringing in, in addition to the regulated framework that Calci provides. Udesh, you mentioned that this increases access for people. And I wonder who specifically this is for within the CalShe ecosystem and folks who are not yet part of the CalShe platform. Who is this product for? This product is built both for the institutions as well as the retail masses. As you are aware, we have several million CalShe traders. and many of them, you know, because of the nature of this contract, because of the size, because of the benefit of not being roles, have now access as opposed to going in and trading through intermediate brokers on dated futures, which are a lot more expensive and in many forms, either through role costs or access.

5:56How are you kind of making decisions about kind of what you offer up next as you seem to increasingly, Udash, move into kind of the traditional world of finance and trading? Like what's guiding it? Great question. I think there are a few things. One, obviously, is client demand in terms of is this product demand good for hedging? Is this product good for speculative needs? Is this something that our constituents are demanding? Second, very important, is we also bring products that we feel we can risk manage. That's why Calci has built one of the cutting-edge clearing and exchange system where we are able to risk manage every second.

6:44We are able to default manage 24-7. And we are able to put in limits and so on and so forth to be able to trap the risk that gets into our system on a much more enhanced basis. So then to build on Carol's question, the pipeline of things that you're considering offering, I mean, the Wall Street Journal reporting that you're looking to expand a rapidly growing universe, what they refer to as risky trading. Prediction markets looking to seek regulatory approval to start offering the country's first regulated perpetual futures tied to single stocks, including Tesla, Apple. and NVIDIA. Can you comment on that?

7:19Sure. We are in the process of filing in short order. So, I think I can definitely say that we are quite interested. And the story goes the same. There are a lot of benefits similar to gold and silver that translate over to the single stock perps. You know, reasonable sizes, no roll costs, centralized liquidity in one contract, not an on-return structure, and a regulated platform. And we have seen some of these equities as well as metals and other perpetuals grow significantly in offshore, unregulated channels.

8:01Udesh Jha:So what we want to do is we want to provide a platform where before they become large like crypto did over the last few years, we want to make sure that there is an alternative available in a regulated platform for those. Yeah, offshore. I mean, we talk a lot about hyperliquid offshore and the interest around that. Is this the same in your view? Would this be the same for retail and institutional or is this geared more toward retail? It is get more, it's get both towards retail and institution. On our platform, we do have institutions of various sizes. And of course, we have a lot of retail. So it's get, one thing I do want to point about is that when we talk about perpetuals, it is very hard to distinguish for the common person, what a regulated perpetual is and what a perpetual that they hear.

8:51Udesh Jha:Oftentimes, the word perpetual that we offer gets confused with what's happened offshore where trades can get auto liquidated. There is very limited risk protection. The amount of money that the entity puts into to protect the trades is less. There is a very different form of surveillance. So all of those things is very important to highlight that the perpetuals that we offer come with a lot of that protection. And not just that, the CFTC customer protection on the collateral that's held is a significant value add for our products. We're speaking with Udash Jha, Chief Risk Officer over at Kalshi.

9:34Udash, you know, you talk about this mitigation of risk, and that's something that you guys, you're emphasizing, whether it's the gold and silver market, excuse me, or whether it's futures tied to single stocks. What's interesting is the contracts, you know, are about leverage, and give a trader the ability to pile on leverage. So I'm curious, what are the risks that you're putting in place? Because leverage by its nature, risk and reward, we know that. But it can also get institutions, individuals into trouble.

10:11Udesh Jha:Sure. And all futures are levered. If you look at the regulated futures, the CME or ICE, they have an hour leverage levels. For example, for gold, around 15 to 20x is no different than what is at a CME level. So from that standpoint, it is not about offering leverage. It's about how do you risk manage leverage, which is a very good question that you have. So what we have done is we have built some real-time risk protection controls. Our markets trade 24-7. So we are able to look into every portfolio to see what is the risk at that point in time, what can be the potential future risk on that portfolio.

10:50Udesh Jha:And we are able to take actions much more if we need to, to protect that. And we are the first exchange slash clearinghouse, which is able to run what's called mark-to-market cycles on a Saturday or a Sunday and run default management on a Saturday or Sunday. So if there were to be a situation where a counterparty to us were going to distress, we have demonstrated that we can actually default manage that book on a weekend, unlike many other platforms where there is trading that's happening 24-7. However, the risk management is left to the weekdays. Interesting. Udish, I'm just trying to think of Calci's identity right now, because it does offer a lot of different things to what seems to me like a lot of different people.

11:37Like if you go to calci.com right now, you can, you know, put a wager on the Zeveriv match right now. It's a very match right now happening. And, you know, at the U.S. Open, the semifinals match. I'm curious if you see overlap into the world that you work on at Calci from like people who are there wagering on sports, for example. Do you see overlap with those accounts or is it a completely different group of people? I think it's a mix. I think there are accounts that would look at those. But we have increasingly seen the growth in what I would call our traditional or institutional products, whether it be somebody using our weather contracts to hedge their risks, somebody using our crude oil or oil contracts to hedge a risk.

12:25Udesh Jha:The key thing is that the size of these, even our prediction contracts, the size and the ability for us to come up with very bespoke contracts is very critical for risk management for this industry. Traditionally, in other exchanges, you have large contracts which trade a lot, but they carry on or they accumulate a lot of risk, but they are not perfect hedges. But what prediction market provides is the ability to put in contracts that are very specific, like straight off Hormuz. We have a contract that identifies exactly how many ships are going to go through. That's a type of a very specific risk.

13:01Udesh Jha:And that's why prediction markets are, in my view, growing, because they provide that complementary risk management set of tools that are not necessarily available in the traditional products that trade. Udish Jha, Chief Risk Officer at CalSheet, joining us from London.

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