South Korea Warns Offshore Perpetuals May Lack Domestic Legal Protections

South Korea’s financial regulator warned Friday that perpetual futures on offshore platforms may fall outside domestic legal protections, leaving local traders with limited safeguards if disputes or platform problems arise.

These contracts have no set expiration date and can be traded around the clock. Some offerings let traders take positions at leverage ranging from 10 to 200 times. At 150 times leverage, an adverse move of about 0.66% in a contract tied to a South Korean stock index could trigger liquidation of the full investment. The example illustrates how a small price change can wipe out the money committed to a highly leveraged position.

South Korean derivatives providers operate under rules that include investor safeguards. Most offshore crypto platforms fall outside the country’s legal framework, making comparable protections difficult to apply. If a platform fails, halts trading or becomes involved in a dispute, local traders may also find it difficult to pursue remedies under South Korean law.

Perpetual futures are also the subject of U.S. regulatory proposals. Firms have sought Commodity Futures Trading Commission approval for contracts tied to individual U.S. stocks and West Texas Intermediate crude oil. The South Korean warning focuses on the protections available to domestic investors trading through offshore platforms.

South Korean financial authorities plan to monitor offshore products linked to the country’s stock market and assess their domestic effects. They also plan to ask major offshore platforms offering those products to cooperate in avoiding violations. If officials detect illegal business activity in South Korea, they plan to refer it to investigative agencies.