CME Group introduces Bitcoin and Ether reference rates for the Asian market

In a significant move to cater to the burgeoning Asian cryptocurrency market, the CME Group, a leading derivatives marketplace, has announced the launch of new reference rates for both bitcoin and ether. This initiative is an extension of the company’s existing rates, primarily focusing on London and New York investors. The development, in collaboration with index provider CF Benchmarks, is a testament to the increasing influence of the Asia Pacific (APAC) region in the global crypto landscape.

A response to growing APAC influence

The CME CF Bitcoin Reference Rate APAC and CME CF Ether-Dollar Reference Rate APAC are scheduled to be available from September 11, as revealed by the companies on Wednesday. This move comes in light of the impressive trading statistics from the APAC region. Giovanni Vicioso, the global head of cryptocurrency products at CME Group, shared that 37% of the company’s total crypto volume in 2023 was traded outside of US hours. Of this, approximately 11% originated from the APAC region.

The CME Group’s decision to introduce these new rates is a strategic response to the evolving dynamics of the crypto market. Historically, the company launched its Bitcoin Reference Rate (BRR) in 2016, which provides a daily reference rate of the US dollar price of one bitcoin as of 4 pm London time. This was followed by the introduction of an Ether Reference Rate in 2018. 

The BRR’s methodology involves aggregating the trade flow from major Bitcoin spot exchanges during a specific one-hour window. This is then averaged based on the volume-weighted medians across twelve five-minute intervals within that hour. Such a calculation method is designed to ensure that the rates are tradable and replicable in the underlying spot markets.

In February 2022, CME Group further expanded its offerings by launching BTC and ETH reference rates, which are published at 4 pm New York time. The forthcoming rates, tailored for the Asian market, will be published at 4 pm Hong Kong and Singapore time.

Implications for Institutional clients and the broader Crypto Market

Vicioso emphasized the significance of these new rates for institutional clients. He stated, “As we continue to see more institutional clients use our bitcoin and ether futures products in active portfolios or structured products like ETFs, these APAC reference rates will allow market participants to more accurately and precisely hedge cryptocurrency price risk. The timing is more closely aligned to their portfolios.”

The announcement from CME Group coincided with another significant development in the crypto world. Coinbase, a major cryptocurrency exchange, revealed that it had received clearance to offer eligible US customers access to regulated crypto futures directly from its platform. This move underscores the growing importance and acceptance of crypto derivatives in the global trading ecosystem. According to the crypto exchange, the global crypto derivatives market accounts for 75% of the total global crypto trading volume.

The CME Group’s commitment to expanding its crypto offerings is further evident from its recent performance metrics. During the second quarter, the company’s crypto futures average daily volume stood at 38,600 contracts. Concurrently, the open interest averaged 79,200 contracts. A report from July by the CME Group highlighted the growing interest among large investors. The number of large open interest holders of bitcoin futures, defined as entities holding at least 25 futures contracts, reached a record average of 107 during the quarter.

Conclusion

The CME Group’s decision to introduce bitcoin and ether reference rates for the Asian market is a significant milestone in recognizing the region’s growing influence in the crypto world. As the global landscape of cryptocurrency trading continues to evolve, such strategic moves by major players like the CME Group and Coinbase indicate the increasing integration of crypto into mainstream financial systems. The future of crypto trading looks promising, with institutions and individual investors seeking more sophisticated tools and platforms to navigate this dynamic market.

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