Kraken's Parent Payward Plans a CFTC-Regulated Perpetual Futures Market on Hyperliquid — But the Details Are Still Thin

Hyperliquid, the on-chain perpetual futures exchange that has emerged as one of the most actively traded decentralised derivatives venues, confirmed on October 26 that Kraken parent Payward intends to become the first CFTC-regulated firm to deploy its own US perpetual futures market using Hyperliquid's HIP-3 operator protocol. The structure routes US clients through a regulated chain of NinjaTrader Clearing, Bitnomial Exchange, and Bitnomial Clearinghouse while using Hyperliquid's on-chain matching engine to process and record trades. It is a novel attempt to bring the transparency and settlement properties of a decentralised order book inside a fully regulated US derivatives structure — but the critical details of which contracts will list, what the funding schedule will be, and who the market makers will be remain unpublished, leaving the deployment as a well-designed regulatory framework that lacks the pricing infrastructure to function as a live market.

Key Takeaways

• Hyperliquid confirmed Payward's plan in an October 26 X post, six weeks after Payward first outlined the structure in a September 16 announcement

• Payward would use HIP-3*, a permissioned variant of Hyperliquid's operator market protocol, allowing it to restrict trading to an allowlist of accounts approved through NinjaTrader Clearing and Bitnomial Exchange

• The regulatory chain: NinjaTrader Clearing onboards clients and carries their futures accounts; Bitnomial Exchange deploys, owns, and administers the HIP-3 market; Bitnomial Clearinghouse clears and settles contracts; Hyperliquid matches orders and records trades on-chain

• This would be Payward's second US perpetual futures venue — it already offers Bitnomial-listed perps on BTC, ETH, SOL, XRP, and five other assets to eligible Kraken Pro users via NinjaTrader Clearing, with funding every eight hours (live since June 15)

• HIP-3 operators stake 500,000 HYPE tokens (locked for at least 183 days) to deploy their own perpetual markets on Hyperliquid with independent order books, margining, and settings

• The operator carries significant account-level control: add or remove accounts from the allowlist, switch accounts to reduce-only mode, cancel resting orders, and move collateral between accounts on the same venue

• Three missing elements will determine whether the market can actually function: regulatory sign-off, named market makers admitted by Bitnomial, and a published funding schedule

What Hyperliquid Is and Why This Matters

Hyperliquid is a Layer 1 blockchain and decentralised exchange designed specifically for on-chain derivatives trading. Unlike most decentralised exchanges that use automated market maker (AMM) mechanisms, Hyperliquid operates a fully on-chain central limit order book (CLOB) — meaning every order, cancellation, and fill is processed and recorded on the Hyperliquid blockchain rather than in a centralised matching engine operated by a company server.

This design gives Hyperliquid a transparency property that centralised exchanges cannot provide: any observer can see the complete order book, all executed trades, and the full history of positions and liquidations in real time, with cryptographic guarantees that the data has not been manipulated. For regulators, auditors, and sophisticated traders who value verifiability of execution, this represents a meaningful structural advantage over traditional centralised matching.

Hyperliquid has grown into one of the highest-volume perpetual futures venues in the decentralised exchange space, largely by attracting active traders with its low latency, tight spreads, and the same user experience as a centralised exchange combined with the custody and transparency properties of a blockchain.

The HIP-3 operator protocol — Hyperliquid Improvement Proposal 3 — extends this architecture to third-party operators, allowing regulated entities to deploy their own perpetual futures markets within the Hyperliquid ecosystem while maintaining independent control over the participants, rules, and economics of their deployment.

Payward's Existing US Perps Business: The Starting Point

To understand what the Hyperliquid deployment adds, it is important to understand what Payward already has running in the US perpetual futures market.

Since June 15, 2026, eligible Kraken Pro users have been able to trade perpetual futures contracts on BTC, ETH, SOL, XRP, and five additional assets directly through Kraken's platform. These contracts are listed by Bitnomial Exchange — a CFTC-designated contract market — and cleared by Bitnomial Clearinghouse, a registered derivatives clearing organisation (DCO). Customer futures accounts are carried by NinjaTrader Clearing, which functions as the futures commission merchant (FCM) bringing the structure within CFTC jurisdiction.

Funding on Kraken's existing US perps is exchanged every eight hours — a standard interval for perpetual futures markets that determines how frequently longs and shorts exchange the funding payments that keep the perpetual price anchored to the underlying spot market.

The key point is that all of the regulated infrastructure Payward is using for its Hyperliquid deployment — NinjaTrader Clearing, Bitnomial Exchange, Bitnomial Clearinghouse — is the same infrastructure already in use for its existing US perps. The Hyperliquid plan does not introduce new regulated counterparties; it adds a new matching engine and order book within the existing approved counterparty chain.

Payward Co-CEO Arjun Sethi acknowledged the competitive dynamic this creates directly: the firm now proposes to offer two separate US perpetual futures venues — its existing Kraken Pro perps and the new Hyperliquid HIP-3* deployment — that will both be accessible to the same approved customers through the same regulated onboarding chain.

Sethi's explanation for why this makes strategic sense was simple: "clients come first." The implication is that different clients may prefer different execution venues — some may value the existing Kraken perps for their track record and liquidity head start, while others may value the on-chain transparency and verifiability that the Hyperliquid deployment adds.

The HIP-3 Architecture: How the Deployment Would Work

What HIP-3 Is

HIP-3 is a Hyperliquid protocol that allows external operators to deploy their own independent perpetual futures markets on the Hyperliquid network by staking 500,000 HYPE tokens — Hyperliquid's native asset — locked for a minimum of 183 days.

Each HIP-3 deployment creates an entirely independent market structure: its own order book, its own margining system, its own fee parameters, and its own settings for leverage, funding rates, and other market mechanics. This independence is what allows an operator to customise the market for a specific audience while still benefiting from Hyperliquid's on-chain matching and settlement infrastructure.

Critically, a HIP-3 market starts with an empty order book. There is no liquidity inherited from Hyperliquid's main market — a new deployment begins from zero and must attract market makers and traders independently. Sethi noted in Payward's September announcement that one venue already holds 98% of Hyperliquid builder-deployed market open interest, illustrating how concentrated liquidity is in these operator markets even after the protocol has been available for some time.

HIP-3*: The Permissioned Variant Payward Will Use

Payward's deployment uses HIP-3* — a permissioned variant of the standard HIP-3 protocol that adds an allowlist feature specific to that deployment. On a standard HIP-3 market, any Hyperliquid user can participate; on a HIP-3* market, only accounts that the operator has approved can interact with the order book.

For Payward's US regulatory requirements, the allowlist is essential: only accounts that have completed the required KYC/AML onboarding through NinjaTrader Clearing and received approval from Bitnomial Exchange would be permitted to trade. This allowlist mechanism is what makes the structure CFTC-compliant — it ensures that every market participant is a verified, eligible US derivatives trader rather than an anonymous wallet address.

Importantly, Hyperliquid's existing markets — the open, permissionless perpetual futures available to global users — are entirely unaffected by the HIP-3* deployment. The two coexist independently, with the permissioned US market operating alongside rather than replacing or modifying the main Hyperliquid platform.

The Mark Price Formula: Staying Anchored Without Inheriting Liquidity

One of the technical design challenges in a permissioned HIP-3* market is maintaining accurate contract valuations without access to the full Hyperliquid main market liquidity. The mark price — used to determine unrealised profit and loss and to trigger liquidations — must reflect true market value rather than the potentially thin prices on the restricted deployment's own order book.

The solution used in HIP-3* venues is a mark price derived from the median of three inputs:

1. The deployer's oracle-based price (an external reference price from off-chain data sources)

2. The price of the matching contract on Hyperliquid's main exchange

3. The venue's own best bid, ask, and last trade price

Using the median rather than the average provides robustness against any single input that deviates significantly — a stale oracle price, a temporarily dislocated main market, or an illiquid venue order book will not dominate the calculation if the other two inputs are aligned. This design keeps liquidations and valuations anchored to the broader market while the deployment builds its own liquidity.

What the mark price formula does not do is add depth to the order book. A US trader on the Hyperliquid HIP-3* venue who wants to close a large position trades against whatever bids the allowlisted market makers have posted on that specific venue — not against the global Hyperliquid user base. The richness of the closing experience will therefore depend directly on how many and how active the market makers Bitnomial admits to the allowlist are.

The Regulatory Chain: Who Does What

The table below summarises the role of each entity in the proposed structure:

Firm Role in the Hyperliquid Plan NinjaTrader Clearing Onboards clients and carries their futures accounts as FCM Bitnomial Exchange Deploys, owns, and administers the HIP-3 market as CFTC DCM Bitnomial Clearinghouse Clears and settles the contracts as CFTC DCO Hyperliquid Matches orders and records all trades on-chain

This structure is deliberately designed around the existing US commodity futures regulatory framework rather than seeking any new regulatory category or exemption. Bitnomial Exchange is a CFTC-designated contract market (DCM) — one of a small number of exchanges explicitly authorised to list commodity derivatives for US persons. Bitnomial Clearinghouse is registered as a derivatives clearing organisation (DCO) — the entity type responsible for guaranteeing contract performance and managing default risk in futures markets.

NinjaTrader Clearing's role as the FCM that carries customer accounts is also significant. Futures commission merchants are the regulated intermediaries that US retail participants must use to access futures markets; NinjaTrader's involvement means the structure satisfies the requirement that US futures customers trade through an appropriately capitalised, CFTC-registered intermediary rather than interacting directly with an exchange.

The novelty in the structure is the fourth entity: Hyperliquid itself, which performs the trade matching function — the core exchange service — using an on-chain blockchain rather than a centralised server. This is what makes the deployment potentially the first instance of a CFTC-regulated US futures market where the matching engine is a public blockchain rather than proprietary exchange infrastructure operated by the regulated DCM.

What the Operator Can Do With Your Account

HIP-3* gives Payward (as the deployer) a set of account-level controls that extend well beyond what centralised exchanges typically acknowledge as part of their operational toolkit. Hyperliquid's testnet documentation specifies the following operator capabilities:

• Add or remove an account from the allowlist: The operator can revoke a previously approved user's access to the venue entirely

• Switch an account to reduce-only mode: Forces a specific account into a state where it can only close existing positions, not open new ones

• Cancel resting orders or place reduce-only orders on an account's behalf: The operator can intervene in an account's order activity without that account initiating the action

• Move collateral from a user's account to another account on the same venue: The operator can transfer margin between accounts on the deployment

Beyond the HIP-3*-specific powers, standard HIP-3 operators can also set leverage limits of up to 50x, adjust funding rate parameters, and halt a specific asset — which cancels all open orders and settles positions at the mark price.

These are powerful tools. In the context of regulated futures markets, many of them are necessary: when a customer defaults or becomes insolvent, a regulated clearing firm must be able to close out positions, transfer or liquidate collateral, and limit the defaulting customer's ability to open new risk. The CFTC's regulatory framework for DCMs and DCOs anticipates and requires the ability to take these protective actions.

The gap that the article correctly identifies is the published rulebook that specifies when and how these powers will be exercised. For a conventional regulated futures market, the rules governing reduce-only status, collateral transfers, position close-outs, and customer eligibility revocation are documented in the exchange's rulebook and trading rules, filed with the CFTC, and available to participants before they open accounts. Payward has not published these rules for the Hyperliquid deployment, and the permissioned features remain on testnet. Traders evaluating whether to trade on the venue cannot currently assess:

• Under what conditions a previously eligible account would be removed from the allowlist

• How long a customer who loses eligibility mid-trade has to close their positions

• The procedure and timeline for collateral return after account closure

• The circumstances under which collateral would be transferred between accounts

These are not minor administrative details — they determine a trader's actual rights and risk exposure as a participant in the market. The regulatory process for approving the deployment (pending at time of writing) will presumably require this documentation to be filed, but it is not yet public.

The Economics: What Payward Hasn't Published

Beyond the regulatory structure, the commercial terms of the HIP-3* deployment remain largely undefined. The article correctly notes three categories of missing information that will determine whether the market is competitively attractive for the participants it targets.

Which Contracts List First

Payward has not said which perpetual contracts would be available at launch. Given the existing Kraken US perps cover BTC, ETH, SOL, XRP, and five other assets, the new deployment might logically start with a subset of those — but starting from an empty order book creates an asset selection problem: the first assets listed need to attract enough market maker participation to create any meaningful depth.

Fees: A 300% Multiplier Is Possible

HIP-3 operators can charge a fee share of up to 300% of the underlying Hyperliquid protocol fee in addition to the base trading cost. The article does not state what Payward intends to charge. For cost-sensitive institutional traders, the combined cost of NinjaTrader Clearing's FCM fees, Bitnomial's exchange fees, and any Payward HIP-3 fee add-on needs to be transparent before traders can assess whether the on-chain execution advantage justifies the total cost versus Kraken's existing product.

Funding: The Make-or-Break for Longer-Dated Positions

Funding rates in perpetual futures determine the cost of holding a position over time. On Kraken's existing US perps, funding is exchanged every eight hours — at 0.01% per eight hours (a common benchmark), this compounds to approximately 2.7% over a 90-day period. For a fund hedging a bitcoin position over three months, this holding cost matters far more than the bid-ask spread at entry.

Payward can set its own funding multipliers, interest rates, and caps on the HIP-3* deployment — meaning the funding schedule on the Hyperliquid venue could be materially different from the existing Kraken perps schedule. Until these rates are published, it is impossible for traders to model the total cost of holding a position through the venue.

The Liquidity Problem: An Empty Book Needs Market Makers

The most immediate practical challenge facing the Payward HIP-3* deployment is the one facing every new trading venue: liquidity begets liquidity, and starting from zero is the hardest position to be in.

Payward noted in its September announcement that in existing builder-deployed HIP-3 markets, one venue already holds 98% of open interest. This extreme concentration of liquidity in a single operator market reflects a dynamic familiar from exchange competition generally: traders concentrate on the most liquid venue because liquidity attracts more liquidity, making it increasingly difficult for late-arriving venues to establish meaningful depth.

For the US-permissioned HIP-3* market, the liquidity pool is additionally constrained by the allowlist: only Bitnomial-approved market makers can provide liquidity on the venue. Bitnomial has not published which market maker firms it intends to admit, and without named market makers — particularly firms with substantial experience in perpetual futures market making — prospective traders cannot assess whether the venue will have competitive spreads or meaningful depth at launch.

The cross-venue arbitrage that would help prices converge between the US HIP-3* market and Hyperliquid's main exchange is also restricted to allowlisted accounts. Firms approved on both venues could in principle buy contracts where they are cheap and sell where they are expensive, pulling prices into alignment — but the tighter the allowlist, the fewer participants available to perform this corrective function, and the wider the potential gap between the two markets.

Three Prerequisites Before This Market Can Function

The article's conclusion is worth preserving and expanding: the Payward Hyperliquid US perps structure is currently a regulatory and technical framework without the pricing infrastructure to operate as a functional market. Three specific developments are required before that changes:

1. Regulatory sign-off: The deployment is explicitly subject to CFTC and applicable regulatory approval, which Bitnomial must secure for the specific contracts and market structure. Payward has given no timeline for this approval, and the regulatory process could require months of documentation, rule filing, and review.

2. Named market makers: Without knowing which firms Bitnomial has admitted to the allowlist as market makers, it is impossible to assess what liquidity the venue will have at launch. A permissioned market's depth is entirely determined by the firms that have agreed to provide it, and that list has not been published.

3. Published funding schedule: Without a disclosed funding rate structure — including the base rate, the interval, and any caps or multipliers — longer-duration traders cannot model their holding costs or compare the Hyperliquid venue to existing alternatives.

Until all three are in place, the deployment represents an interesting and potentially pioneering regulatory structure for on-chain US futures — but one that operates as a framework without prices, a door without a market behind it.

Why This Is Worth Watching

Despite the current information gaps, the Payward-Hyperliquid structure merits sustained attention because it represents a genuinely novel institutional design: a CFTC-regulated derivatives market where the matching engine is a public blockchain, where every order and fill is permanently and transparently recorded on-chain, and where the regulated layer sits at the client onboarding and clearing level rather than at the execution layer.

If the structure receives regulatory approval and launches successfully, it could establish a precedent for how other regulated entities approach decentralised exchange infrastructure. The combination of CFTC-supervised participant eligibility with on-chain execution transparency addresses two concerns simultaneously — the regulatory concern that derivatives trading needs supervised participant screening, and the market integrity concern that matching engine operations should be verifiable rather than opaque.

For the Hyperliquid ecosystem and the HYPE token, a successful regulated US deployment would extend the network's reach into the institutional and regulated market segments where most trading volume ultimately concentrates. For the broader crypto derivatives landscape, it would demonstrate that DeFi infrastructure and traditional financial regulation can coexist in a single coherent structure rather than remaining in permanent tension.

Whether it achieves any of this depends on the three prerequisites above — and the details that remain unpublished.

Summary

Payward's plan to run a CFTC-regulated US perpetual futures market on Hyperliquid's HIP-3* operator protocol — confirmed by Hyperliquid on October 26 — is one of the more structurally sophisticated attempts to bridge regulated derivatives infrastructure and on-chain execution transparency attempted in the US market. The four-entity chain (NinjaTrader Clearing, Bitnomial Exchange, Bitnomial Clearinghouse, Hyperliquid) keeps all regulated participant management and clearing within CFTC-supervised entities while placing the matching engine on a public blockchain where every trade is verifiable. The HIP-3* permissioned variant restricts the order book to Bitnomial-approved allowlisted accounts — making the venue regulatory-compliant but creating the starting-from-zero liquidity challenge that every new market faces. Missing at time of writing: regulatory approval, named market makers, listed contracts, leverage terms, fee structure, funding schedule, and the operator rulebook governing use of the account-level controls that HIP-3* deployers hold. A framework this carefully designed deserves the detail that would allow traders to evaluate it as an actual trading venue — and that detail has not yet arrived.