Following the listing of SK hynix ADR (SKHY.US), a significant price gap emerged between it and the underlying shares, prompting the HIP-3 builder TradeXYZ on Hyperliquid to open perpetual futures markets for both instruments, creating a key window to observe cross-border equity spread dynamics.

On July 9th, SK hynix sold 177.9 million American Depositary Receipts at $149 each, raising $26.5 billion. This marks the largest ADR issuance by a foreign company on record, surpassing Alibaba's 2014 offering of $21.8 billion. The order book was oversubscribed by more than 7 times, and the Nasdaq opening price on July 10th was $170.

Subsequently, the price gap between the ADR (SKHY) and the underlying shares (SKHX) widened dramatically. The premium timeline is as follows: On July 13th, the ADR premium relative to the issue price expanded to approximately 25.6%, while the underlying shares plunged 15.4%. The KOSPI index also fell over 8% intraday, triggering a circuit breaker, yet the ADR declined only 9.3%. On July 14th, the ADR surged 27%, closing at $193.92, with its premium over the underlying shares skyrocketing to 51%. On July 15th, the previously soaring ADR fell 9% to close at $176.46, while the underlying shares rebounded 8.8%. The ADR's premium over the underlying shares consequently narrowed from 51% to 30.7%.

Root Cause of the Premium: Arbitrage Channel Closure

In an efficient market, institutions would buy the cheaper underlying shares, convert them to ADRs, and sell the ADRs to increase supply and eliminate the price gap. However, this channel is currently closed. These ADRs were not created by depositing existing shares; instead, they were created by issuing 17.79 million new shares to the depositary bank, Citibank. These underlying shares are scheduled for an additional listing on the Korea Exchange on July 29th. The Korea Securities Depository has indicated that applications for interconversion between the underlying shares and ADRs will only be possible after that date. Furthermore, the issued ADRs account for less than 3% of SK hynix's total shares. Strong demand from US institutions met with an inelastic supply, causing the spread to widen.

Perpetual Futures Market Emergence

Data shows that during this same period, the HIP-3 builder TradeXYZ on Hyperliquid opened perpetual futures markets for both sides. The contract tracking the underlying shares, SKHX, had been operational for some time, while the contract tracking the ADR, SKHY, launched as a pre-IPO contract the day before its listing and converted to a standard contract upon the start of Nasdaq trading.

As the gap between the underlying shares and the ADR widened, the funding rates in the two markets diverged in opposite directions. On the 13th, as the underlying shares plummeted, the SKHX funding rate jumped to +0.10% per hour, while the SKHY rate fell to -0.065%. A positive funding rate means long positions pay short positions, and a negative rate means the opposite. This indicates long positions flooded into the underlying share side, while short positions flooded into the ADR side. This combination points to a single trade—a bet on the premium narrowing, executed on Hyperliquid.

Key Insights from the Case

This event validates several hypotheses about stock perpetual futures through a single case study. It directly demonstrates what stock perpetual futures practically offer, what the current market lacks, their relationship to the underlying market, and which markets give them the strongest demand.

Bypassing Frictions in the Spot Market

Betting on a narrowing premium requires buying the underlying shares and shorting the ADR. In the spot market, this requires Korean won funding, a foreign investor account, settlement infrastructure, and ADR borrowing availability. With perpetual futures, it can be achieved simply by using USDC as collateral and trading both contracts on a single platform.

Lack of a Tool to Separate Funding Rate Exposure

The current structure of the two-sided trade is not ideal. Even if the premium persists, funding costs accumulate hourly, eroding collateral. In spot arbitrage, once underlying shares are converted to ADRs, the spread can be locked in as realized profit. Perpetual futures lack this forced convergence mechanism. SKHX converges to the underlying share index, and SKHY converges to the ADR index; neither mechanism closes the gap between the two indices. Perpetual futures reflect the spread in the underlying markets but do not resolve it. Even with a correct directional view, late convergence can allow accumulated holding costs to eat into returns. Ultimately, it is a structure that simultaneously carries the view "the premium will narrow" and the cost of carry. A separate market to trade the funding rate itself is needed to decouple the two.

For example, Pendle's Boros tokenizes funding rates into Yield Units (YU), splitting them into fixed and floating components. A position paying funding rates, like a long SKHX position, could offset this cost by buying the floating-rate-receiving YU on Boros. This hedges by converting a variable cost into a fixed one. The cost itself doesn't disappear, but future outlays can be locked in at entry, enabling position size management. However, Boros currently supports markets only for major assets like BTC and ETH; HIP-3 stock perpetual futures are not yet included. Therefore, trading this spread currently means bearing the volatility of funding costs.

Function as a Leading Indicator

TradeXYZ's SKHY pre-IPO market pointed to $164 three hours before the Nasdaq open, $169.80 one hour before, and $169.92 one minute before, while the actual opening price was $170. The SKHX market also trades during nights and weekends when the KRX is closed, with Korean traders using its price as a leading indicator for the next day's open. Perpetual futures are no longer confined to a derivative role tracking the underlying asset; they generate prices first during times when the original market is closed.

Market Value Inversely Proportional to Underlying Asset Accessibility

These are two futures contracts tied to the same company, but outside periods of sharply widening spreads like on the 13th, SKHY's funding rate has largely stayed near zero. The reason is the existence of physical ADRs on Nasdaq and, from the 14th, listed US options, allowing arbitrageurs to capture the basis. In contrast, SKHX lacks such hedging tools, making the funding rate the sole mechanism to clear the market. Consequently, it has become the single largest contract, accounting for 33% of total HIP-3 volume and 50% of stock perpetual futures volume. Listing perpetual futures for a highly liquid US large-cap stock is akin to rebuilding something that already exists. The more restricted the access, the higher the value of the perpetual futures contract.

Future Outlook and Key Date

A key date to watch is July 29th. When the underlying shares receive their additional listing on the Korea Exchange and applications for interconversion between the underlying shares and ADRs open, the currently blocked arbitrage channel will partially reopen. However, even with the channel open, asymmetry will remain. Redeeming ADRs for underlying shares is unrestricted, but converting underlying shares to ADRs is only possible within the issuance cap—and compressing the premium requires the latter. Because of this, it remains uncertain whether the premium will narrow sharply. Nevertheless, even in that scenario, Hyperliquid remains the only venue where this spread can be traded.