BTIC Transactions on Cryptocurrency Futures

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. The basis 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 participants¹ 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.

A BTIC transaction provides the ability to trade a 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 specifications². 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.

Market participants interested in accessing a cryptocurrency futures contract through a BTIC transaction have the flexibility to the trade the respective cryptocurrency futures contract against a reference rate calculated at 4:00pm London time or 4:00pm New York time. Each reference rate will have its own BTIC ticker.

For example, a BTIC on Bitcoin futures against London Close transaction (ticker BTB) executed by 4:00 p.m. London time will be transposed to a futures price against that day’s respective CME CF Bitcoin Reference Rate. BTB transactions executed after 4:00 p.m. London time will use the next trading day’s reference rate.

Similarly, a BTIC on Bitcoin futures against New York Close transaction (ticker BNB) executed by 4:00 p.m. New York time will be transposed to a futures price against that day’s respective CME CF Reference Rate New York. BNB transactions executed after 4:00 p.m. New York 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.

Timing: must be reported to the exchange within five (5) minutes of agreeing to the terms of the transaction. Block trade reporting time window extends to 15 minutes during overnight⁴ hours. Please consult cmegroup.com for the latest contract specifications.

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

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.

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

1. Execute a BTIC transaction directly on screen
2. Negotiate and execute a bilateral block trade³. 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 December 2022 BTIC on Bitcoin futures against New York Close (ticker BNBZ2).

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

The client has calculated that the fair value of the spread between Bitcoin futures and the BRRNY (CME CF Bitcoin Reference Rate New York) 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. New York time, the BRRNY (for that trade date) is published at a level of 20,500. The client’s BTIC position will then be replaced with a long futures position of four BTCZ2 contracts at a price of 20,600 (BRRNY + the transacted basis; 20,500 + 100).

Separately, assume that the client is an eligible contract participant ‒ as defined by the Commodity Exchange Act ‒ and needs to buy 20 contracts of the December 2022 BTIC on Ether futures against London Close . 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.

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

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 $0.50 per ether over fair value and negotiates to buy 20 ETBZ2 contracts at 15.50. Within five minutes (or 15 minutes during overnight hours)⁴ 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 ETHUSD_RR (for that trade date) is published at a level of 1,200. The client’s BTIC position will then be replaced with a long futures position of 20 ETHZ2 contracts at a price of 1,215.50 (ETHUSD_RR+ the transacted basis; 1,200 + 15.50).

• 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 (ETHUSD_RR)

London Close

New York Close

*BTIC on Cryptocurrency futures against New York close will be available starting July 25, 2022, pending regulatory review

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

1. A defined term under Section 1a of the U.S. Commodity Exchange Act. Commodity Trading Advisors (CTAs), and other persons performing a similar role, may also participate in block transactions provided they have total assets under management exceeding 25 million U.S. dollars and the block trade is suitable for their customers.
2. 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.
3. BTIC block trades must comply with requirements in CME Rule 526 (Block Trades), as applicable.
4. 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.