CME CF BITCOIN REAL TIME INDEX (BRTI)
Methodology Guide
Version: 2
Version Date: 06 March 2017
TABLE OF CONTENTS
Table of Contents
1 Version History ............................................................................................................................................ 3
2 Definitions ..................................................................................................................................................... 4
3 Summary Description ............................................................................................................................... 5
4 Methodology and Rules .......................................................................................................................... 6
4.1 Methodology ......................................................................................................................................6
4.1.1 Qualitative Description ..........................................................................................................6
4.1.2 Mathematical Representation .............................................................................................7
4.2 A Note on Properties .......................................................................................................................8
5 Contingency Calculation Rules........................................................................................................... 11
5.1 Delayed Data.................................................................................................................................... 11
5.2 Erroneous Data ............................................................................................................................... 11
5.3 Potentially Erroneous Data ......................................................................................................... 11
5.4 BRTI Calculation Failure ............................................................................................................... 12
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VERSION HISTORY
1 Version History
Version Version Date Changes to Previous
1 10 November 2016 N/A
2 06 March 2017 Added description of treatment of erroneous data.
Changed calculation methodology from static to dynamic
depth. Effective: 18 March 2017, 16:30:00 London time.
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DEFINITIONS
2 Definitions
API: Application programming interface.
Calculation Time: Any time as of which the BRTI is published.
Constituent Exchange: A bitcoin trading venue elected by the Bitcoin Pricing Product
Oversight Committee to serve as pricing source for the calculation of the BRTI.1
Relevant Order Book: The universe of the currently unmatched limit orders to buy or
sell bitcoin versus U.S. Dollars on a Constituent Exchange that is reported through its
API to the Calculation Agent.
Retrieval Time: The time, as given by the server clock of the Calculation Agent, as of
which the Relevant Order Book of a Constituent Exchange is requested by the
Calculation Agent through the API of the Constituent Exchange.
1
Constituent Exchanges are published on the Administrator’s website.
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SUMMARY DESCRIPTION
3 Summary Description
The CME CF Bitcoin Real Time Index (“BRTI”) is a real time index of the U.S. Dollar price
of one bitcoin. It is representative of current bids and offers of market participants to
buy or sell bitcoin on Constituent Exchanges. It is geared towards timeliness and
represents an unbiased estimator of the instantaneous bitcoin price.
Name CME CF Bitcoin Real Time Index
CME Ticker Symbol BRTI
Administrator Crypto Facilities Ltd.
Calculation Agent Crypto Facilities Ltd.
Description Instantaneous U.S. Dollar price of one bitcoin
Real time aggregation of order book data of
Calculation Methodology
Constituent Exchanges
Approximately every second of each day for the
Dissemination Time
entire year including weekends and holidays.
Dissemination Precision 0.01 U.S. Dollars
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METHODOLOGY AND RULES
4 Methodology and Rules
4.1 Methodology
4.1.1 Qualitative Description
The BRTI is calculated in real time based on the Relevant Order Books of all
Constituent Exchanges. An order book is a list of buy and sell orders with associated
limit prices and sizes that have not yet been matched due to lack of supply or demand
to trade at that price. It therefore informs about the price at which a trader can buy or
sell a certain amount of bitcoins as of now. In line with existing bitcoin market
practises, the price/sizes tuples of buy orders (“bids”) descend by price and the
price/size tuples of sell orders (“asks”) ascend by price.
Calculation steps are as follows:
1. At the Effective Time, the Relevant Order Book of each Constituent Exchange is
added to a joint list of order books.
2. The joint list of order books is aggregated into one consolidated order book. If the
size of a bid or ask order exceeds 100 bitcoins, it enters the consolidated order
book with a size of 100 bitcoins, the order size cap.
3. The cumulative bid price-volume curve, ask price-volume curve, mid price-volume
curve and mid spread-volume curve are calculated from the consolidated order
book at integer bitcoin transaction volume granularity.
a. The bid price-volume curve maps bitcoin transaction volume to the
marginal U.S. Dollar price per bitcoin a seller is required to accept in order
to sell this volume to the consolidated order book.
b. The ask price-volume curve maps a bitcoin transaction volume to the
marginal U.S. Dollar price per bitcoin a buyer is required to pay in order to
purchase this volume from the consolidated order book.
c. The mid price-volume curve represents the average of the bid price-volume
curve and the ask price-volume curve.
d. The mid spread-volume curve represents the percentage deviation of the
ask price-volume curve from the mid price-volume curve.
4. The utilized depth is calculated as the maximum cumulative volume for which the
mid spread-volume curve does not exceed 0.5%. If this volume is less than one,
utilized depth is set to one.
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METHODOLOGY AND RULES
5. The mid price-volume curve is weighted by the normalized probability density of
the exponential distribution up to the utilized depth.
6. The BRTI is then given by the sum of the weighted mid price-volume curve
obtained in the previous step.
4.1.2 Mathematical Representation
The following table shows the symbols used in the mathematical representation of the
BRTI.
Symbol Name Description Type
Effective time The time at which the BRTI is Parameter
calculated
Order size cap The size above which any Parameter, set to = 100
excess size of a bid or ask
order is discarded
Deviation from The maximum percentage Parameter, set to = 0.5%
mid deviation of a limit order from
the mid price-volume curve,
until which that limit order is
used for the calculation of the
BRTI
Lambda A parameter that determines Parameter, set to =
.
the shape of the probability
density function of the
exponential distribution
Volume The independent variable of a Internal variable
price-volume curve
Ask orders The ask orders of the Input
consolidated order book as of
the effective time, ordered
ascending by price
,
Ask order The th price/size ask order Input
with , = pair of the consolidated order
, , ̇ , , book
, , ̇ , =
, ,
Bid orders The bid orders of the Input
consolidated order book as of
the effective time, ordered
descending by price
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METHODOLOGY AND RULES
,
Bid order The th price/size bid order Input
with , = pair of the consolidated order
, , ̇ , , book
, , ̇ ,
= , ,
Normalization A parameter chosen such that Output
factor ∑ =1
BRTI The BRTI at time Output
Using the above notation, we define the ask price-volume curve, , the bid
price-volume curve, , the mid price-volume curve, , and the mid spread-
volume curve, , in each case as of the effective time , as:
( )= , ̇ , < ̇ , ≥ Eq. 3a
( )= , ̇ , < ̇ , ≥ Eq. 3b
( )+ ( )
( )= Eq. 3c
( )
( )= − Eq. 3d
( )
The utilized depth, ̅, , is calculated as:
, = ( ( )≤ ( )> , ) Eq. 4
The BRTI as of the effective time , , is then given by:
= ( ) Eq. 5
4.2 A Note on Properties
The BRTI reflects the instantaneous supply and demand of bitcoin and results in a
robust, yet highly timely indication of the current bitcoin price. This is achieved
through the following design choices:
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METHODOLOGY AND RULES
Order Book Data
The BRTI is calculated from order book data, as opposed to, for instance, trade data.
Order book data is composed of unmatched limit orders to buy or sell bitcoin. It
informs about the price at which a trader can buy or sell bitcoins now or in the future
and is therefore forward-looking by nature. Further, absent retrieval constraints, order
book data is always up to date. This is in contrast to trade data, which is produced in
stochastic intervals only and informs about the price at which bitcoin has traded in the
past.
Mid Price Volume Curve
The mid price volume curve represents the average of the marginal price at which a
certain amount of bitcoins can be sold and at which that same amount can be bought.
By averaging across the mid price volume curve, the BRTI represents a blend of such
(hypothetical) transactions at various transaction sizes.
Utilized Depth
The BRTI is calculated from the section of the mid price volume curve for which ask
limit orders at a certain depth diverge by no more than 0.5% from the mid price at
that depth. It therefore reflects a significant portion of the top of the consolidated
order book (as opposed to, for instance, the best bid and ask prices only) but discards
limit orders that are less likely to be matched. This makes it a meaningful
representation of true bitcoin liquidity and robust to local changes in order books.
Note that utilized depth will always include any crossing section of the consolidated
order book, as well as the non-crossing section with ask limit orders up to 0.5% away
of the mid price volume curve. If zero size resides in both these sections, utilized
depth is set to one. The BRTI is then effectively equal to the mid price of the
consolidated order book.
Exponential Weighting
The mid price-volume curve is weighted by the normalized probability density of the
exponential distribution. The exponential distribution and its first derivative are
monotonically decreasing, resulting in a higher emphasis on the initial section of the
mid price-volume curve, i.e. bid and ask prices that are closest to the global best bid
and ask price.
Markov Process and Martingale
Indices are frequently based on historical data, such as recent trade prices or volumes.
This can result in certain predictability, for instance due to the expectation that stale
prices will be updated or that a price will drop out of a weighting window.
By relying solely on order book data, the BRTI is both a Markov process and a
martingale. A Markov process is a stochastic process with a probability distribution
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METHODOLOGY AND RULES
that depends only on the current information set, not on historical information sets.
The martingale property implies that the best prediction of the next BRTI value is its
current value:
( | , ,…, )=
This makes the BRTI useful for applications that require an unbiased estimator of the
future bitcoin price.
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CONTINGENCY CALCULATION RULES
5 Contingency Calculation Rules
5.1 Delayed Data
Delayed data is treated according to the following rules:
1. If the Retrieval Time of the Relevant Order Book of a Constituent Exchange is at
least 30 seconds older than the Calculation Time, the Constituent Exchange is
disregarded in the calculation of the BRTI for that Calculation Time.
If the Retrieval Times of the Relevant Order Books of all Constituent Exchanges are
each at least 30 seconds older than the Calculation Time, a BRTI calculation failure
occurs for that Calculation Time (see Section 5.4).
5.2 Erroneous Data
All Relevant Order Books are subject to an automated screening for erroneous data
according to the following rules:
1. If a Relevant Order Book contains at least one instance of a non-numeric or non-
positive limit price or size, it is flagged as erroneous.
2. If the format of a Relevant Order Book deviates from the expected format such
that it cannot be parsed, it is flagged as erroneous.
3. If the Relevant Order Book contains zero bid orders or zero ask orders, it is flagged
as erroneous.
Relevant Order Books flagged as erroneous for a given Calculation Time are
disregarded in the calculation of the BRTI for that Calculation Time.
If the Relevant Order Books of all Constituent Exchanges are flagged as erroneous for
a given Calculation Time, a BRTI calculation failure occurs for that Calculation Time
(see Section 5.4).
5.3 Potentially Erroneous Data
All Relevant Order Books are subject to an automated screening for potentially
erroneous data according to the following rules:
1. For each Constituent Exchange individually, the current mid price is calculated as
the average of the highest bid price and the lowest ask price of the Relevant Order
Book.
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CONTINGENCY CALCULATION RULES
2. For each Constituent Exchange, the absolute percentage deviation of the mid
price, as calculated in the previous step, from the median of the mid prices of all
Constituent Exchanges is calculated.
3. If for any Constituent Exchange the absolute percentage deviation, as calculated in
the previous step, exceeds 25%, the Relevant Order Book of that Constituent
Exchange is flagged as potentially erroneous.
Relevant Order Books flagged as potentially erroneous for a given Calculation Time
are disregarded in the calculation of the BRTI for that Calculation Time. The
occurrence of any such flag is reported to the Oversight Committee.
If the Relevant Order Books of all Constituent Exchanges are flagged as potentially
erroneous for a given Calculation Time, a BRTI calculation failure occurs for that
Calculation Time (see Section 5.4).
5.4 BRTI Calculation Failure
If the BRTI cannot be calculated for a given Calculation Time, for instance because
- the Retrieval Times of the Relevant Order Books of all Constituent Exchanges are
each at least 30 seconds older than the Calculation Time, or
- all Relevant Order Books are flagged as erroneous or potentially erroneous (see
Section 5.2); or
- any other reason or circumstance that prevents the orderly calculation of the BRTI,
then the BRTI for that Calculation Time is not published. The occurrence of any BRTI
calculation failure is reported to the Oversight Committee.
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CONTACT INFORMATION
Contact Information
Chicago Mercantile Exchange Inc.
Address Contact
CME Group Inc. Web: https://www.cmegroup.com/bitcoin
Attention: Market Data Phone: +1 312 634 8395
20 South Wacker Drive Email: marketdata@cmegroup.com
Chicago, IL 60606
Crypto Facilities Ltd
Address Contact
Crypto Facilities Ltd Web: https://www.cryptofacilities.com
th
4 Floor Phone: +44 20 7655 6085
25 Copthall Avenue Email: contact@cryptofacilities.com
London EC2R 7BP
United Kingdom
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NOTICE AND DISCLAIMER
Notice and Disclaimer
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NOTICE AND DISCLAIMER
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