BTIC Transactions on Cryptocurrency Futures

What is a BTIC transaction?

Basis Trade at Index Close (BTIC) transactions enable market participants to trade futures contracts at a fixed spread, or basis, relative to a reference price. For CME Cryptocurrency futures, the basis is defined as the difference in price between the futures contract and the respective CME CF Reference Rate. It is expressed in discrete index points where the executed trade price is the total number of index points to be applied to the corresponding CME CF Reference Rate.

The BTIC order book is open 23-hours-a-day, allowing real-time price discovery in the futures basis as investors around the globe submit orders against the underlying cryptocurrency reference rate. Additionally, eligible contract participants may execute BTIC block trades 24/7 and submit for clearing during the appropriate clearing window. Whether trading on-screen or bilaterally, a wide range of market participants may use and benefit from the BTIC mechanism.

Delving deeper on BTIC transactions

A BTIC transaction provides the ability to trade the futures contract at a price understood to be the theoretical equivalent of the underlying reference rate with given assumptions on the all-in implied financing to maturity. Since the BTIC market is expressed in terms of the futures price differential to the spot index value, the indicated market prices can be either negative or positive depending on expected financing and time to maturity. BTIC bid, ask, and trade prices must be in valid tick increments ‒ as per the corresponding BTIC contract specifications[1]. The BTIC price will be transposed to a futures contract price approximately fifteen (15) minutes after the corresponding reference rate is published, where the futures position will be assigned a price equal to the official closing index value plus the basis.

Cryptocurrency BTIC transactions executed by 4:00 p.m. London time will be transposed to a futures price against that day’s respective CME CF Reference Rate. BTIC transactions executed after 4:00 p.m. London time will use the next trading day’s reference rate.

BTIC transactions are not permitted on the last trade date of an expiring futures contract.

About BTIC block trades2

Timing: must be reported to the exchange within five (5) minutes of agreeing to terms of the transaction. Block trade reporting time window extends to 15 minutes during overnight3 hours. Please consult cmegroup.com for the latest contract specifications.

Reporting: must be submitted via CME Direct or CME ClearPort.

Features of a BTIC transaction

Efficiency: Easily transfer risk and optimize holdings between Cryptocurrency futures and spot markets.

Flexibility: Execute Cryptocurrency futures transactions directly or indirectly through the BTIC mechanism to best suit your trading strategy.

Precision: Enjoy real-time price discovery and isolate the basis between the futures price and the underlying benchmark CME CF Reference Rate.

Choice: Transact anonymously on CME Globex or bilaterally negotiate as block trade.

Liquidity: Tap into the market-leading volumes and open interest of a regulated Cryptocurrency futures pool.

Certainty: Exactly know your basis, benchmark reference rate, and how your futures price is calculated.

Security: Risk management and safeguards provided by CME Clearing.

Potential use cases

Client type

Use case

Cryptocurrency fund managers and ETF providers

To more effectively manage inflows and outflows around their respective NAV print

ETF authorized participants/market makers

To efficiently facilitate ETF creations and redemptions

Lending/borrowing platforms

To transfer intraday risk between the spot and futures cryptocurrency markets

Relative value hedge funds/traders

To manage basis risk and effect arbitrage strategies

Liquidity providers

To lay off risk and tighten futures quotes

Structured product desks

To spark new product innovation

Banks

To better manage risk associated with cryptocurrency OTC structures and NDFs

How would this work?

Suppose a market participant would like to access Bitcoin futures through the BTIC mechanism before 4:00 p.m. London time. Such client has the flexibility to:

  1. Execute a BTIC transaction directly on screen
  2. Negotiate and execute a bilateral block trade4. In this case, both clients need to be eligible contract participants ‒ as defined by the Commodity Exchange Act ‒ and the trade size needs to meet or exceed the respective minimum block order size.

The decision to trade anonymously through the CLOB or bilaterally through blocks is up to the client and is dependent on the size of the trade, trading strategy, and type of client ‒ among other things. To illustrate, consider the examples below:

Assume a client wants to buy four contracts of the September 2021 BTIC on Bitcoin futures (ticker BTBU1).

The client opens her Globex screen and sees the following quote:

Ticker

Bid Qty

Bid Price

Ask Price

Ask Qty

BTBU1

5

96

100

5

The client has calculated that the fair value of the spread between Bitcoin futures and the BRR (CME CF Bitcoin Reference Rate) is $100 per bitcoin and lifts the offer on four contracts. The client’s BTIC trade is now complete. 

Shortly after 4:00 p.m. London time, the BRR (for that trade date) is published at a level of 40,500. The client’s BTIC position will then be replaced with a long futures position of four BTCU1 contracts at a price of 40,600 (BRR + the transacted basis; 40,500 + 100).

Now assume that the client is an eligible contract participant ‒ as defined by the Commodity Exchange Act ‒ and needs to buy 50 contracts of the September 2021 BTIC on Bitcoin futures. Although the client may work the order on the CLOB, she’s concerned with moving the market and would prefer to execute the trade in a single transaction.

Referring to the list of Cryptocurrency futures block liquidity providers, the client learns that she has the choice and flexibility to work with brokers, block trading platforms, or directly to find a counterparty to her trade. For the ease of completing the larger trade in one swoop, the client agrees to pay $1 per bitcoin over fair value and negotiates to buy 50 BTBU1 contracts at 101.

Within five minutes (or 15 minutes during overnight hours)5 of the two counterparties agreeing to the trade, both sides of the trade must be price reported to CME Direct or CME ClearPort. The BTIC block trade is now complete.

Shortly after 4:00 p.m. London time, the BRR (for that trade date) is published at a level of 40,500. The client’s BTIC position will then be replaced with a long futures position of 50 BTCU1 contracts at a price of 40,601 (BRR + the transacted basis; 40,500 + 101).

Why use CME futures for cryptocurrency exposure?

  • No need to establish a wallet; eliminates hacking risk
  • Easily convert bitcoin or ether exposure to USD
  • No actual movement of cryptocurrency coins
  • Do not need possession of cryptocurrencies to sell (or to borrow to sell short)
  • Price transparency, leverage, liquidity, and capital efficiencies
  • Trade on a regulated, established exchange
  • USD-settled contract to benchmark CME CF Bitcoin Reference Rate (BRR) or CME CF Ether-Dollar Reference Rate

BTIC on Cryptocurrency futures specifications

 

Bitcoin futures

Micro Bitcoin futures

Ether futures

CME Product Codes

Futures: BTC

Futures: MTB

Futures: ETH

BTIC: BTB

BTIC: MIB

BTIC: ETB

Underlying Reference Rate

CME CF Bitcoin Reference Rate (BRR)

CME CF Bitcoin Reference Rate (BRR)

CME CF Ether-Dollar Reference Rate (ETHUSD_RR)

Underlying Contract Size

5 bitcoin

0.10 bitcoin

50 ether

BTIC Globex Hours

Sunday – Friday 6:00 p.m. ET – 4:00 p.m. London Time (11:00 a.m./12:00 p.m. ET).

Monday – Thursday 4:30 p.m. London Time (11:30 a.m./12:30 p.m. ET) – 5:00 p.m. ET.

Friday 4:30 p.m. London Time (11:30 a.m./12:30 p.m. ET) – 5:00 p.m. ET for the following business day’s reference rate

Monday – Thursday 5:00 p.m. – 6:00 p.m. ET daily maintenance period.

BTIC ClearPort Hours

Sunday 6:00 p.m. ET – Monday 4:00 p.m. London Time (11:00 a.m./12:00 p.m. ET).
Monday – Thursday 1:00 p.m. ET – 6:45 p.m. ET and 7:00 p.m. ET to 4:00 p.m. London Time (11:00 a.m./12:00 p.m. ET).
Monday – Friday 4:00 p.m. London Time – 1:00 p.m. ET and 6:45 p.m. – 7:00 p.m. ET daily maintenance period.

Minimum Price Fluctuation

$1 per bitcoin

$1 per bitcoin

$0.05 per ether

Listed Contracts

BTIC offered on all six consecutive monthly contracts listed inclusive of nearest two Dec contract months.

BTIC Trading

For a BTIC or BTIC block trade executed on a given trading day at or before 4:00 p.m. London time, the corresponding futures price shall be made by reference to the closing index value for the current trading day.

For a BTIC or BTIC block trade executed on a given trading day after 4:00 p.m. London time, the corresponding futures price shall be made by reference to the closing index value for the next trading day.

 

Please refer to our Frequently Asked Questions (FAQ) for BTIC trading during holidays

Termination of Trading

Futures: Trading terminates at 4:00 p.m. London time on the last Friday of the contract month if that day is a business day in either the U.K. or the US. If that day is not a business day in both the U.K.  and the US, trading shall terminate on the preceding day that is a business day in either the U.K. or the US.  

BTIC: For an expiring futures contract, BTIC trading shall terminate at 4:00 p.m. London time on the business day immediately prior to final expiration.

Block Minimum

5 contracts

10 contracts

5 contracts

Each leg of a spread trade needs to meet the block minimum.

To get the latest updates on BTIC on Cryptocurrency futures, visit cmegroup.com/CryptoBTIC.


References

  1. Note that the futures contract trade price resulting from the basis applied to the reference rate does not need to be in the contract specified tick increment. It will be cleared in increments of 0.01, as the underlying reference rate is reported to a two decimal place level of precision.
  2. BTIC block trades must comply with requirements in CME Rule 526 (Block Trades), as applicable.
  3. Overnight hours are between 6 p.m. – 9 a.m. ET Sunday-Thursday on regular business days and at any time on the weekends. Regular trading hours are 9 a.m. – 5 p.m. ET Monday-Friday.
  4. BTIC block trades must comply with requirements in CME Rule 526 (block trades), as applicable.
  5. Overnight hours are between 6 p.m. – 9 a.m. ET Sunday-Thursday on regular business days and at any time on the weekends.

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