SKHX & SKHY: Trading the Premium on HIP-3

1. The SK Hynix ADR Premium and the Blocked Arbitrage

On July 9, SK Hynix sold 177.9 million American Depositary Receipts (ADRs) at $149 each, raising $26.5B. It is the largest ADR offering ever by a foreign company, surpassing Alibaba's $21.8B in 2014. The book was more than seven times oversubscribed, and the Nasdaq opening price on July 10 was $170.

The price gap between the ADRs (SKHY) and the original shares (SKHX) then widened sharply. The timeline of the premium is as follows:

• July 13: The ADR premium, which was about 3% against the offer price, widened to 25.6% as the original shares plunged 15.4%. The KOSPI also fell more than 8% intraday, triggering a circuit breaker, but the ADRs fell only 9.3%.
• July 14: The ADRs surged 27% to close at $193.92, and the premium over the original shares spiked to 51%.
• July 15: The ADRs, which had surged the day before, fell 9% to close at $176.46, while the original shares rebounded 8.8%. The ADR premium over the original shares narrowed from 51% to 30.7%.

The cause of the premium was the closure of the arbitrage channel. In an efficient market, institutions buy the cheaper original shares, convert them into ADRs, then sell those ADRs to increase supply and kill the gap.

However, that route is not open yet. This ADR was not created by depositing existing shares. It was created by issuing 17.79 million new shares to the depositary bank (Citibank), and those original shares are scheduled for additional listing on the Korea Exchange on July 29. The Korea Securities Depository stated that applications for mutual conversion between the original shares and the ADRs will be possible only after that date.

On top of this, the ADRs issued account for less than 3% of SK Hynix's total shares. US institutional demand met a supply that cannot expand, and the gap widened.

2. What HIP-3 Funding Rates Reveal About the Current Stage of Equity Perpetual Futures

Over the same period, TradeXYZ, a HIP-3 builder on Hyperliquid, had perpetual futures markets open on both of these sides. SKHX, which tracks the original shares, had been running for some time, and SKHY, which tracks the ADRs, was listed as a pre-IPO contract one day before the listing and converted to a standard contract when Nasdaq trading began.

As the gap between the original shares and the ADRs widened, the funding rates of the two markets split in opposite directions. On the 13th, while the original shares were plunging, SKHX funding jumped to +0.10% per hour and SKHY dropped to -0.065%.

A positive funding rate means longs pay shorts, and a negative rate means the reverse. This means longs piled into the original-share side and shorts piled into the ADR side at the same time. This combination points to a single position. A trade betting on the premium compressing was executed on Hyperliquid.

This episode verified several hypotheses about equity perpetual futures through a single case. It shows directly what equity perpetual futures actually provide, what the current market lacks, what relationship they hold with the underlying market, and which markets give them the strongest demand:

1. The expressive power to route around spot market friction: Betting on the premium compressing requires buying the original shares and shorting the ADRs. In the spot market, won funding, a foreign investor account, settlement infrastructure, and ADR borrow are all required. With perpetual futures, it becomes possible with USDC collateral for two contracts on a single platform.
2. The gap in tools for separating the funding rate: The current two-sided betting position structure is not ideal. Even while the premium holds, funding accrues every hour and collateral shrinks. In a spot arbitrage, the gap can be locked in as realized profit the moment the original shares are converted into ADRs, but perpetual futures have no such forced convergence mechanism. SKHX converges to the original-share index and SKHY converges to the ADR index, and neither narrows the gap between the two indices. Perpetual futures reflect the gap in the underlying market but do not resolve it. Even if the direction is right, a late convergence lets accumulated carry eat into the return. In the end it is a structure that carries both the view that the premium will compress and the cost of holding it.
3. Separating the two requires trading the funding rate itself in a separate market. For example, Pendle's Boros tokenizes the funding rate into YU (Yield Unit), splitting it into fixed and floating. A position that pays funding, such as an SKHX long, can buy the YU that receives floating funding on Boros to offset that cost. This makes possible a hedge that converts a variable cost into a fixed one. The cost itself does not disappear, but future outlays can be locked in at entry, which makes position sizing possible. However, the markets Boros currently supports are limited to major assets such as BTC and ETH, and HIP-3 equity perpetual futures are not included. Therefore, trading this spread right now means bearing the volatility of the funding cost as it comes.
4. The function of perpetual futures as a leading indicator: TradeXYZ's SKHY pre-IPO market pointed to $164 three hours before the Nasdaq open, $169.80 one hour out, and $169.92 one minute out, and the actual opening price was $170. The SKHX market also trades overnight and on weekends when the KRX is closed, and Korean traders reference this price as a leading indicator for the next day's open. Perpetual futures are not staying within the bounds of a derivative that tracks the underlying. They are producing the price first for the stretch when the original market is closed.
5. Market value inversely proportional to access to the underlying: These are two futures contracts tied to the same company, but SKHY's funding rate stays near zero outside stretches like the 13th when the gap widened sharply. The reason is that a physical ADR exists on Nasdaq and US options were listed from the 14th, so arbitrageurs collect the basis. SKHX, on the other hand, has no hedging instrument, so funding remains the only thing that clears the market, and as a result it became the single largest contract, taking 33% of all HIP-3 volume and 50% of equity perpetual futures volume on its own. Listing a perpetual future on a liquid US large cap is building something that already exists one more time. The more access is blocked, the more the perpetual futures contract is worth.

The point to watch going forward is July 29. When the original shares are additionally listed on the Korea Exchange and applications for mutual conversion between the original shares and the ADRs open, the blocked arbitrage channel partially opens.

However, even when the channel opens, the asymmetry remains. Redeeming ADRs back into original shares has no limit, but converting original shares into ADRs is only possible within the issuance cap, and compressing the premium requires the latter.

Because of this, whether the premium narrows sharply is uncertain, and even then Hyperliquid remains the only place where the spread can be traded.