CME CF BRR and BRTI Oversight Meeting Minutes

  • 17 Apr 2017
  • By CME Group

Agenda for the Oversight Committee meeting for BRR and BRTI to be held on 1 March 2017.

  1. Formalities:
    • Apologies for absence
    • Quorum
    • Conflicts of interest
  2. Update on BRR/BRTI index
  3. Review of updated BRTI methodology
  4. Review of Constituent Exchanges (including new applications, changes with existing constituent exchanges)
  5. Update on Ticksmith go-live and distribution channels
  6. Update on any questions/comments received
  7. Discussion items:
    • Impact of Chinese Government actions; knock on impact on other exchanges, market volatility and potential exclusions in the future
    • Andreas Antonopoulos to give his view on scaling and forking
  8. Next meeting – June
  9. Any Other Business

Minutes of the Oversight Committee meeting for BRR and BRTI held via conference call on 1 March 2017

1. Formalities

Attendance

Name

Role

Attendance

Gavin Lee – CME

Chair

On phone

Payal Lakhani – CME

Member

On phone

Mr Timo Schlaefer – Crypto Facilities Ltd

Member

On phone

Mr Andreas M. Antonopoulos – Independent Consultant

Member

On phone

Mr Michael Moro – Genesis Global Trading

Member

On phone

Mr William Knottenbelt – Imperial College London

Member

On phone

Quorum

Quorum met – meeting began at 16:00 London time on 01 March 2017. The meeting was opened with an introduction which recapped the objectives of the Oversight Committee.

Conflicts of Interest

Other than the conflicts of interest already registered, no further conflicts were raised. 


2. Update on BRR/BRTI Index

To date 152 out of 152 BRR rates have been successfully calculated.

There were no observed problems with computing or distributing the rate.

CF offered to send an email with the rate at 4pm to members of the OC on a daily basis for increased transparency.

Visualisation tools are being developed which will help analyse historic prices. This is expected to be available in the next few months. 


3. Review of BRTI Methodology

An explanation of the change made to the BRTI methodology was given. The suggestion is to move away from taking a fixed depth of 5,000 bitcoins of the consolidated order book, and instead go 0.5% deep from the mid price-volume curve. The main advantages being:

  • considering only limit orders that could get matched with significant probability,
  • dynamically adjusting for changes in order book liquidity; and
  • dynamically adjusting for changes in the bitcoin price level.

CF have been calculating the index using both V1 and V2 of the BRTI methodology in parallel since mid February 2017. The V2 BRTI tended to be more reactive to price changes. During the parallel computation period, its level was slightly higher than that of the V1 BRTI due to the observed shape of the mid-price-volume curve which was generally downward sloping as depth increased. The V2 BRTI also tended to go less deep in the consolidated order book, with the average depth during the parallel computation period being around 1,200 bitcoins.

It was asked if members of the Oversight committee had received, read and were in agreement with the updated BRTI Methodology Document. All members had read the documents and were in agreement with the contents.

It was asked if further back testing of the new methodology was required before promoting it to production. It was discussed that the past month of bitcoin trading had seen high volatility and so through the parallel runs, the new methodology has already been through vigorous back-testing. On this basis, it could be promoted once notice had been given to the market.

It was agreed that the retrospective websites of CF and CME would be updated to inform the market of the forthcoming change in methodology and it was agreed that that barring any new concerns raised, the new methodology should be effective from 16:30:00 London time on 18th March 2017.


4. Constituent Exchanges

No new exchanges have approached CF or CME with an application to become a CE, nor were any exchanges suggested for inclusion by a member of the public.

CF investigated trading volumes and potential access restrictions for some of the current CE’s.  


5. Distribution channel update

CME has been monitoring click through via the CME website. It is noted that:

  • The top resourced documents were the Imperial college whitepaper, the BRR methodology document and the BRTI methodology document.
  • 35% of traffic has been from mobile devises.
  • 12 different firms are listening to the MDP data feed. This includes Banks, Hedge Funds, Data providers and exchanges.
  • Ticksmith successfully went live in February enabling clients to have access 24/7/365.

CME is in conversations with several news agencies and bitcoin focused websites who are interested to distribute the BRR and BRTI  

Initial conversations with bitcoin exchanges, providers of digital wallets and ETF issuers were also underway. 


6. Update on questions and comments received

In the period 1 Dec – 1 March, CME had received a few questions pertaining to:

  • the BRR and BRTI methodology,
  • depth of market used in the calculation,
  • licencing; and
  • creation of ETF product.

CME have answered all outstanding questions. 


7. Discussion Items

An open discussion between all committee members was had on:

The Impact of Chinese Government actions; knock on impact on other exchanges, market volatility and potential exclusions in the future. Takeaways:

  • Highs of recent rallies were followed by PBOC dampening the rally by the imposition of certain new due diligence rules.
  • Chinese exchanges announced the implementation of these rules.
  • The price did not suffer a down trend and little to no reduction in volume.
  • If bitcoin or legal tender withdrawals were to be suspended, the would need to be excluded from the BRR and BRTI calculation.

The impact and probability of scaling and forking. Takeaways:

  • A contentious hard fork is unlikely at present due to insufficient momentum and high technical complexity.
  • Miners could be negatively affected by an increase in block size due to the anticipated reduction in mining fees.

8. Frequency of meetings

It was agreed that the Oversight committee will meet quarterly with ad hoc meetings as required. The next oversight meeting will be scheduled for early June 2017.


9. Any Other Business

None. 


Actions

  • The websites of CF and CME will be updated to inform the market of the forthcoming change in the BRTI methodology.
  • The V2 BRTI methodology will be effective from 16:30:00 London time on 18th March 2017.
  • CME will schedule the date of the next oversight committee meeting for early June 2017 and circulate the details.

The meeting was bought to a close at 17:00 London time.

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