[Column] The Message of ICE's Entry into the Perpetual Futures Market for Korea

Intercontinental Exchange (ICE) logo. Source: ICE website

The parent company of the New York Stock Exchange (NYSE), Intercontinental Exchange (ICE), has announced its entry into the perpetual futures market.

Perpetual futures are derivatives that originated in the virtual asset (digital asset) market, characterized by having no expiration date and being available for trading 24 hours a day.

On the 29th (local time), ICE announced a contract to launch perpetual futures based on the TradeXYZ platform and the Layer 1 blockchain project Hyperliquid in the U.S. traditional market.

Through this contract, Hyperliquid will provide the underlying infrastructure, while TradeXYZ will be responsible for product design and implementation. TradeXYZ will create perpetual futures products that track the prices of stocks, commodities, and foreign exchange on top of Hyperliquid.

ICE plans to establish and operate a trading market and clearing system for individual investors, separate from the existing futures market for institutional investors. Once regulatory approval is obtained, investors who have undergone customer verification (KYC) and anti-money laundering (AML) procedures will be able to trade through futures brokerage firms, which will manage margin requirements, profit and loss settlements, and counterparty default risk.

On the same day, ICE also announced an equity investment in TradeXYZ, and legendary investor Stanley Druckenmiller also revealed his investment in TradeXYZ. This indicates that perpetual futures, which have grown in the digital asset market, are beginning to enter the institutional framework based on traditional financial capital and trading and clearing infrastructure.

ICE's announcement did not come suddenly. The company executed a strategic investment in the global digital asset exchange OKX last March. Through this, ICE plans to launch futures products regulated in the U.S. based on the digital asset spot prices formed at OKX and collaborate to allow OKX users to trade ICE's financial products.

The perpetual futures being promoted through TradeXYZ will also be offered to investors through a joint venture between ICE and OKX once regulatory approval is obtained. The structure involves supplying products designed by TradeXYZ to the user base held by OKX, while ICE will manage the trading market and clearing.

Other global companies are already taking action.

In the U.S., the Commodity Futures Trading Commission (CFTC) opened the door for businesses to support perpetual futures trading services when it approved Calci's BTC (Bitcoin) perpetual contract as a futures product last May. As a result, U.S. asset trading platforms like Robinhood and the U.S. digital asset exchange Coinbase are providing regional perpetual futures services.

In contrast, domestic digital asset exchanges are still focused on spot trading. Consequently, many domestic digital asset investors are trading perpetual futures on overseas exchanges. While overseas companies are accumulating product development and trading and clearing experience, the domestic industry has not even had the opportunity to enter related services.

If the regulatory framework for digital assets, including perpetual futures, is not expedited, even systems that could benefit the national economy, like taxation, may be delayed. The recent controversy over the inability to tax the profits from perpetual futures at overseas digital asset exchanges is closely related to the delay in regulatory reform. Without establishing product regulations and a taxation system together, there will be gaps in investor protection and domestic industry competitiveness.

Of course, it should be noted that the CFTC has not yet approved ICE's perpetual futures services.

There is also resistance from traditional U.S. financial institutions regarding perpetual futures. The Chicago Mercantile Exchange (CME) previously filed a lawsuit against the CFTC in June, arguing that the CFTC's decision to approve Calci's Bitcoin perpetual contract as a futures product was incorrect and that perpetual futures should be regulated as swaps.

Moreover, even if traditional financial firms like ICE enter the perpetual futures market, the risks of investment losses due to high leverage or forced liquidation due to rapid price fluctuations will not disappear. It remains a challenge to determine how to legally classify perpetual futures and what regulations to apply.

Therefore, it is essential to examine not only the speed of foreign companies' entry but also the rules established and risk management during the process. The conditions for product approval by the CFTC, ICE's separate clearing system, and the legal issues raised by CME can all serve as important references when designing domestic regulations. Based on this, regulatory agencies and the industry can discuss the types of products and the range of investors that can be permitted domestically. Systematic preparations must begin now to assess the feasibility and timing of actual service implementation.

Even while discussions regarding perpetual futures are not taking place in Korea, the overseas perpetual futures market continues to grow, and domestic investors are utilizing overseas markets. While caution is necessary in hastening the introduction, it is also time to consider the costs associated with delaying regulatory preparations. ICE's entry into the perpetual futures market has shown that it is becoming increasingly difficult to postpone related discussions in Korea.

This content is provided for general informational purposes only and doesn't constitute financial, investment, legal, or tax advice. Any events, rewards, online promotions, or related information mentioned herein should not be considered a recommendation, solicitation, or invitation to purchase, sell, trade, or otherwise deal in any crypto assets. Crypto assets are highly volatile and may result in loss. The availability of WEEX services, products, and related events may vary by region. You are responsible for ensuring that your participation is in accordance with applicable local laws and regulations.