Podcast Summary: Unchained

Episode: Will Perps Eat All of Finance? Ex-FTX.US CEO Brett Harrison Bets Yes (#940)
Host: Laura Shin (with guest host Steve Ehrlich)
Guest: Brett Harrison (Former FTX US CEO, Founder of Architect)
Date: November 5, 2025

Episode Overview

In this episode, Brett Harrison, renowned for his prior leadership at FTX US and now founder of the innovative exchange Architect, dives deep into the burgeoning world of perpetual contracts (“perps”) spreading across all asset classes—not just crypto. The discussion spans the evolution of financial market structures, regulatory frameworks, risk management pitfalls illustrated by recent market shocks, and how Architect is aiming to safely and efficiently bridge TradFi and digital asset derivatives.

The main theme: Can perpetuals revolutionize all of finance, and how can new platforms offer these derivatives safely and at scale?

Key Discussion Points & Insights

1. What Are Perpetuals, and Why Are They Spreading?

[02:26] Brett Harrison:

• Perpetual futures (perps) differ from traditional expiring futures: originally invented in the 1990s, but only popularized by crypto exchanges from the 2010s.
• Real-world adoption: “For cryptocurrencies, perpetuals on things like Bitcoin trade vastly more than the actual underlying spot. It’s something like, you know, seven to ten times more volume trains in perpetuals than the actual underlying spot cryptocurrencies.”
• Expansion: Architect aims to apply perps to “foreign currencies, single stocks, stock indexes, precious metals, rare earth metals, energy products” in a regulated way, offering users margin efficiency and cross-asset portfolio construction.

2. Architect’s Regulatory Structure and Product Approach

[04:44] Brett Harrison:

• Architect is licensed as a US CFTC introducing broker (for futures) and a broker-dealer under the SEC (for stocks/ETFs).
• Their exchange is separately regulated in Bermuda with two licenses:
  • IBA License: For offering perps on traditional asset classes.
  • DABA License: For accepting stablecoins as collateral.
• Emulating a “modern day competitor to Interactive Brokers,” the platform enables both institutional and (potentially in time) direct customer access with full algorithmic trading capability.

3. Perps vs CFDs: Market Structure Matters

[06:42] Harrison:

• Distinction: CFDs (Contracts for Difference) are bilateral, non-standardized, broker-vs-customer instruments, often resulting in brokers “shutting you off” if you’re too profitable.
• Perpetuals on Architect are multilateral and transparent: “We host a centralized, regulated, transparent, anonymous order book where buyers and sellers are anonymously matched and the exchange itself doesn’t have any skin in the game.”

4. Risk Management Lessons from 'Black Friday' (Recent Market Event)

[10:50] Discussion on market events (Black Friday crash):

• Recent incident: Exchanges using a single price oracle (Binance) for liquidation, leading to abrupt liquidations, forced “tear-ups,” and widespread confusion.
• Harrison’s critique:

  “If you have your wins clawed back from you...it’s really hard to reestablish trust in the exchange.” [12:29]

• Architect’s approach: Multi-layered risk controls—price bands, margin calls, orderly liquidations, insurance funds, only resorting to 'ADL' or tear-ups as an absolute last resort.

5. Oracles, Leverage, and Margining

[15:25, 16:03] How to prevent manipulation & margin blowouts:

• Price oracles: Architect licenses industry-standard benchmarks (e.g., WMR 4pm for FX, established third-party rates for stocks/metals).
• Leverage:
  • “We are taking a product-by-product approach...the amount of leverage we allow per product is based on our model that takes into account the last 10, 20 years of price history.”
  • Examples:
    • FX perps (Euro/USD): up to 25x
      Stocks (Tesla): typically up to 8-9x
    • “[On volatile assets] we may require a max leverage of only maybe eight to nine times or something like, you know, a 12% initial margin.” [19:20]
  • Automated alerts for approaching margin maintenance and option for quick top-ups via both fiat and stablecoins.

6. Architecture of the Exchange Ecosystem

[08:41] Hybrid B2B/B2C strategy:

• Offers a full-featured GUI and API for institutional users.
• Envisions white-label distribution through intermediaries (brokerages, primes, etc.).
• Insurance fund: Built from revenue and potentially outside capital, with possible participant co-staking for yield exposure.
• Liquidity: Initial incentives for market makers; focus on tight spreads and deep books from day one.

  “We are offering multiple kinds of incentives for day one market makers...we have multiple market makers already signed up for that program.” [29:57]

7. Prediction Markets & Leveraged Speculation

[23:15] On platform differences:

• Kalshi and Polymarket do not currently offer leverage.
• Architect is institution-focused, targeting use cases in portfolio hedging/speculation for “economically critical” assets, not sports/political bets.

8. Tokenization & Collateral Innovation

[25:58] Tokenized assets as margin:

• Harrison is bullish on stablecoins and tokenized money market fund shares as on-chain collateral, allowing for instant transfers and retention of yield while posted as margin.

  “You can continue to earn interest and yield on your collateral while it’s locked up being used as margin for a futures trade.”

• Envisions future collateral types (EURC, JPY stablecoins, new tokenized assets) for even more flexible hedging and efficiency.

9. The Arms Race: Exchanges Going “All Asset, All the Time”

[28:50] Competition:

• Robinhood, Coinbase, Kraken, and others all adding perps, tokenized stocks, prediction markets.
• Architect’s position: Instead of chasing retail, focus on deep, integrated back-end partnerships and institutional client needs.

  “We'd rather partner with them…the way that Kalshi has and distribute our products that way...as opposed to trying to compete to be the Everything retail app.” [31:51]

Notable Quotes & Memorable Moments

• On the opportunity in perps:
  “To me, the really interesting capital efficiencies come in when a single customer can build a portfolio out of perps across multiple asset classes...all within the same system. That’s really exciting to me.”
  — Brett Harrison [00:00, 32:49]

• On risk management lessons:
  “Sometimes I see crypto market structure relearning the lessons from traditional finance that were sort of hard earned over decades.”
  — Brett Harrison [10:50]

• On the future of tokenized collateral:
  “I am most excited about tokenization when it comes to new forms of derivatives collateral...the more types of these kinds of things that exist, I think the more options people will have to maximize their capital efficiency.”
  — Brett Harrison [25:58]

• On the challenge of launching an exchange:
  “With any exchange, you're solving a very difficult two sided cold start problem of getting the makers and the takers.”
  — Brett Harrison [32:07]

Important Timestamps

• 00:00 – Harrison: Vision for cross-asset perpetual portfolios
• 02:26 – Why perps are better suited for 24/7 digital and now traditional assets
• 04:44 – Architect’s multi-jurisdictional regulatory set-up
• 06:42 – Perps vs CFDs: Key differences
• 10:50 – Deconstructing the “Black Friday” crypto market crash, ADL, and risk lessons
• 15:25 – Importance of reliable oracles and anti-manipulation strategies
• 19:20 – Specific leverage and margining examples (FX vs. stocks)
• 22:10 – Insurance funds, default waterfall
• 23:15 – Views on prediction markets, use of leverage
• 25:58 – Tokenized collateral and new financial instruments
• 28:50 – How Architect will scale vs. large “everything” exchanges
• 32:07 – Challenges & opportunities: cold-start liquidity, exciting future

Summary Takeaways

• Perpetuals (perps) are poised to expand far beyond crypto, likely to become a universal hedging and speculation tool across all major asset classes.
• The critical challenge is getting market structure and regulation right to avoid replaying the same risk management mistakes (e.g., Black Friday liquidations).
• Architect is building a highly regulated, institutionally focused platform, working both directly and via strategic distribution partners, emphasizing risk controls, product standardization, and innovative margin/collateral mechanisms.
• Excitement is high for how tokenized assets will further revolutionize capital efficiency for professional traders.

For more, visit: Architect Exchange

(Episode not sponsored; summary omits advertisements and promotional interruptions.)