How CBOE Used Benchmarks for Settlement of Margined BTC and ETH Futures Contracts

THE PROBLEM

With a view to launching margined Bitcoin (BTC) and Ether (ETH) futures contracts, CBOE needed a regulated indices and benchmark provider to help support independent and reliable U.S. dollar-based settlement within their offerings. 

This was integral to their strategy of taking an intermediary-inclusive approach, ensuring separation of duties to avoid any potential conflicts of interest, and giving added confidence to institutional investors. 

THE solution

After engaging with the market and exploring their options, CBOE chose to partner with Kaiko Indices to build three single-asset Customized Indices aligned to their strategic priorities for settlement in their margin digital asset futures:

–  CBOE Kaiko Rates 

–  CBOE Kaiko Bitcoin Rate (‘CKBR’)

–  CBOE Kaiko Ether Rate (‘CKER’)

These BMR-compliant digital asset benchmarks were built using a robust aggregation methodology designed to take the volume-weighted median combined with a TWAP to deliver a fair price. 

With strict vetting of data sources to include only the most liquid and trusted exchanges, combined with quarterly reviews to ensure maximum validity, the Benchmarks provide an ongoing representative and broad reflection of crypto markets. This helps maintain the integrity of the settlement price and its methodology, actively discouraging potential manipulative conduct and pricing anomalies. 

More Details

With Kaiko Indices, CBOE’s unified spot and derivatives trading platform enables customers to easily access both markets, creating opportunities for additional capital and operational efficiencies, all powered by clean and reliable data. Take a look at our CBOE Kaiko Rates Rulebook for a full breakdown of the methodology and supporting data behind these regulated benchmarks. Alternatively, take a look at the CFTC filing.

View Rulebook