South Korea’s Financial Services Commission (FSC) warned Friday that offshore perpetual futures may leave local traders without domestic safeguards, while leverage can expose them to full losses after a slight price move.
The contracts can track stocks, crypto assets or other markets, but unlike dated futures, they have no preset end point. They remain tradable throughout the day, the FSC said. Some products allow leverage ranging from 10 to 200 times. In the FSC’s example, an adverse move of roughly 0.66% in a Korean stock-index contract at 150 times leverage could force liquidation of all invested funds. The example shows how a small shift against a leveraged position can wipe out the amount invested.
South Korean derivatives providers must meet market-entry standards and investor-protection requirements. The FSC said individuals seeking to trade futures or options face conditions that can include maintaining a basic deposit, completing training before trading and participating in simulated trading. Most operators of offshore virtual-asset platforms fall outside South Korea’s legal framework, the commission said, so domestic protections may not extend to their users.
That gap may make it difficult for customers to seek relief under Korean law if an offshore provider goes bankrupt, stops operating or halts trading, the FSC said. The commission also cited technical or financial incidents and disputes as situations in which users could struggle to obtain a remedy. Authorities may have difficulty checking whether customer assets are properly protected, it added.
The FSC plans to track offshore products linked to South Korea’s stock market and assess their effects at home. It will ask major platforms offering those products to cooperate in preventing violations of Korean law and refer illegal business activity in South Korea to investigative agencies, the commission said. Officials will also consider whether similar products should be introduced domestically and what rules should apply, taking market effects, investor protection and international discussions into account.
