Why CME, ICE Pricing Data Are About to Boost Bitcoin

Mainstream exchange embrace of Bitcoin could lead to less volatility and further acceptance and new opportunities.

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Why CME, ICE Pricing Data Are About to Boost Bitcoin

Mainstream exchange embrace of Bitcoin could lead to less volatility and further acceptance and new opportunities.

In what can be seen as a mainstream financial world’s embrace of Bitcoin, the Chicago Mercantile Exchange (CME Group) and Intercontinental Exchange Inc. (ICE) are all set to publish data on prices of Bitcoin. CME Group is likely to start publishing this data in the fourth quarter of 2016 while ICE, the owner of the New York Stock Exchange (NYSE) is considering if it should include data from various exchanges for a daily settlement price which it has been publishing since May of 2015.

Recently Dwijen Gandhi of ICE told Reuters that NYSE will soon launch a real-time pricing index which he said would provide additional transparency and insight into the Bitcoin price.

CME Group plans two new Bitcoin products

CME Group and ICE taking the Bitcoin dive is good news for the newly established ‘Digital Asset Class’. The participation of exchanges would allow investors and traders alike to easily acquire the information that they need to trade Bitcoin with more confidence.

According to a press release dated May 2, 2016, the CME group has said that they will collaborate with Crypto Facilities Ltd, a digital assets trading platform, and that they will be developing two new products which they plan to launch by Q4, 2016.

CME CF Bitcoin Reference Rate (BRR), which will provide a final settlement price in US dollars at 4 PM London Time on each trading day and the CME Bitcoin Real Time Index (RTI), which allows for real time access to Bitcoin prices.

Cointelegraph talked with Sandra Ro, Executive Director at CME Group about how these developments would affect Bitcoin prices and she says:

“There is no current bitcoin reference rate which is considered “standard” market convention. There are many real time indices but we believe our methodology, inclusion of only the most serious bitcoin exchange data, and focus on developing digital assets will add significant credibility to the nascent digital asset market.”

It is notable that RTI will be calculated by Crypto Facilities and will be calculated  based on global demand to buy and sell Bitcoin aggregated into a consolidated order book.

The Price of Bitcoin will be in US dollar terms and will be published once every second according to data made available by CME on the website.

NYSE Bitcoin index NYXBT

On the other hand, the New York Stock Exchange has already wet its feet in the Bitcoin pool by launching the NYSE Bitcoin Index (NYXBT). NYXBT is the first ever exchange-calculated and disseminated Bitcoin index according to ICE.

NYXBT uses a ‘unique methodology’ according to the ICE press release which relies on “rules-based logic to analyse a dataset of matched transactions and verify the integrity of the data to ultimately produce an objective and fair value for one Bitcoin in US Dollars at 4 pm London Time.”

NYXBT will at first take data from transactions from the Coinbase exchange. It is pertinent to mention here that NYSE had made a minority investment in Coinbase in 2015.

Thomas Farley, NYSE Group President, says:

“As a global index leader and administrator of ICE LIBOR, ICE Futures U.S. Dollar Index and many other notable benchmarks, we are pleased to bring transparency to this market. By combining our technology infrastructure with our expertise in index calculation and data management, we will continue to launch complementary products based on our rigorous standards and proprietary index methodology.”

Expect more mainstream participation and new products

It seems that the mainstream financial world is finally ready for Bitcoin. This could mean a new era in which Bitcoin could actually become THE digital asset class and could also lead to further delivery of new financial products for traders and investors.

Cointelegraph talked with Fran Strajnar, Founder and chief executive officer of BraveNewCoin (BNC), an institutional Digital Asset Data provider. Strajnar is excited about these new developments.

Strajnar says to CoinTelegraph:

“What Bitcoin and the entire Digital Asset Class needs to hit mainstream is not just consumer and application adoption but financial infrastructure and the adoption of quality market data services, by well established trading platforms.”

Fran Strajnar, Founder of BraveNewCoin (BNC)

He added that BNC itself provides market data and indexing solutions.

As for opportunities for traders in the form of new products, he thinks that because Bitcoin is global, functions like nothing else and requires a global spot price.

Strajnar expects to see two things evolve from CME’s Bitcoin reference rollout in Q4:

  1. Creation of various Derivative products & further ETF potential, which will help with reducing volatility.
  2. A disparity between US Dollar denominated Bitcoin trading activity and other BTC trading pairs, seeing as the CME index only includes BTC/USD trading. A good arbitrage opportunity will come out of this.
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