SK Hynix ADR (SKHY.US) Premium 51%: HIP-3 Perpetual Futures Arbitrage Analysis

According to Woofun AI, there was a huge price difference between SK hynix (SK hynix) ADR (SKHY) and the underlying stock (SKHX) after listing, and TradeXYZ, the HIP-3 builder on Hyperliquid, immediately opened a perpetual futures market for the two. This tool became a key window for observing the cross-border equity spread game.

On July 9, SK Hynix sold 177.9 million American Depositary Receipts at a price of $149 each, raising $26.5 billion. This is the largest ADR issuance ever by a foreign company, surpassing Alibaba's 2014 record of US$21.8 billion. The subscription book was oversubscribed by more than seven times, and the NASDAQ opening price on July 10 was $170. Subsequently, the price gap between ADR (SKHY) and original shares (SKHX) widened dramatically.

The premium timeline is as follows: On July 13, the ADR premium of about 3% of the issue price was extended to 25.6%, while the original stock plummeted 15.4%. The KOSPI index also fell more than 8% intraday, triggering a meltdown, but ADR only fell 9.3%. On July 14, ADR surged 27% to close at $193.92, and its premium over the original stock soared to 51%. On July 15, ADR, which had surged the day before, fell 9% to close at $176.46, while the original stock rebounded 8.8%. The ADR premium over the original stock narrowed from 51% to 30.7%.

The reason for the premium was the closure of the arbitrage channel. In an effective market, institutions buy cheaper underlying stocks, convert them to ADR, and then sell ADR to increase supply and eliminate spreads. However, this channel is currently not open. Instead of depositing existing shares, ADR was created by issuing 17.79 million new shares to Depositary Bank (Citibank). These original shares are scheduled to be additionally listed on the Korea Exchange on July 29. The Korea Securities Depository stated that an application for mutual conversion between the original shares and ADR will only be possible after that date.

Furthermore, the issued ADR accounts for less than 3% of SK Hynix's total shares. American institutional demand was met with unexpandable supply, and the price spread widened as a result.

Data compiled by Woofun AI shows that during the same period, HIP-3 builder TradeXYZ on Hyperliquid opened a perpetual futures market for both parties. SKHX, which tracks the original stock, has been in operation for some time, and SKHY (SKHY.US), which tracks ADR, went live in the form of a pre-IPO contract the day before listing and switched to a standard contract when NASDAQ trading began. As the gap between original shares and ADR widens, capital rates in the two markets diverged in opposite directions. On the 13th, while the original stock plummeted, SKHX's funding rate jumped to +0.10% per hour, while SKHY dropped to -0.065%. A positive funding rate means that the long pays the short, while a negative rate does the opposite. This indicates that bulls are pouring into the original stock side at the same time, while bears are pouring into the ADR side.

This combination points to a single position — a trade was executed on Hyperliquid betting on a narrowing premium.

This incident verified several hypotheses about perpetual stock futures through a single case. It directly shows what perpetual stock futures actually provide, what the current market lacks, how they relate to the underlying market, and which markets give them the strongest demand: the ability to express to bypass friction in the spot market: betting on narrowing premiums requires buying the original stock and shorting ADR. In the spot market, this requires conditions such as KRW capital, foreign investor accounts, settlement infrastructure, and ADR loans. In perpetual futures, you only need USDC as collateral to trade two contracts on a single platform, which can be achieved.

Lack of a tool to separate capital rates: The current structure of bilateral betting positions is not ideal. Even if the premium persists, funding rates will accumulate every hour, causing collateral to shrink. In spot arbitrage, once the original stock is converted to ADR, the spread can be immediately locked in as realized profit, but perpetual futures do not have this forced convergence mechanism. SKHX converges on the original stock index and SKHY converges on the ADR index, neither of which can close the gap between the two indices. Perpetual futures reflect the underlying market's spread, but they don't solve it. Even in the right direction, too late convergence can erode returns from cumulative holding costs.

Ultimately, it is a structure that simultaneously carries the “premium will narrow” view and holding costs. A separate market transaction capital rate itself is required to separate the two. For example, Pendle's Boros tokenized funding rates into YU (Yield Units), splitting them into fixed and floating parts. Positions that pay capital rates, such as SKHX bulls, can buy YU to receive variable funding rates on Boros to offset costs. This enables hedging the conversion of variable costs into fixed costs. The cost itself won't go away, but future expenses can be locked in when entering the market, thus enabling position size management.

However, the markets currently supported by Boros are limited to mainstream assets such as BTC and ETH, and HIP-3 stock perpetual futures have not been included. Therefore, the current transaction spread means bearing the fluctuation in the cost of capital.

The function of perpetual futures as a leading indicator: TradeXYZ's SKHY pre-IPO market was pointing at $164 three hours before NASDAQ opened, $169.80 an hour ago, and $169.92 a minute ago, while the actual opening price was $170. The SKHX market is also trading overnight and weekend when KRX is closed, with South Korean traders using its price as a leading indicator for the next day's opening. Perpetual futures are no longer limited to tracking the underlying asset's derivative role, but are the first to generate prices during periods when the original market is closed. Market value inversely proportional to the accessibility of the underlying asset: these are two futures contracts tied to the same company, yet SKHY's funding rate remained close to zero outside of a period such as the sharp widening of the spread on the 13th.

The reason is that NASDAQ has physical ADR, and US options have also been listed since the 14th, so arbitrators can charge the base difference. However, SKHX has no hedging tools, and the funding rate is the only mechanism to clear the market, so it is the single largest contract, monopolizing 33% of the total HIP-3 trading volume and 50% of the stock perpetual futures trading volume. Listing perpetual futures for US large-cap stocks with strong liquidity is tantamount to building on something that already exists. The more access is blocked, the higher the value of perpetual futures contracts. The next point worth watching is July 29th. When the original stock is additionally listed on the Korea Exchange and the application for mutual conversion between the original stock and ADR is opened, the blocked arbitrage channel will be partially opened.

However, even when the channel is open, the asymmetry persists. There is no limit on ADR redemption for original shares, but conversion of original shares to ADR can only be carried out within the issuance limit, and the latter is required to reduce the premium. Because of this, it's still uncertain whether the premium will narrow drastically, but even so, Hyperliquid is the only place where this spread can be traded.