Micro Bitcoin: What is the Bitcoin Reference Rate (BRR)?

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CME Micro Bitcoin Futures (MBT) is a cash-settled futures contract based on the price of Bitcoin. In practice, this is very similar to stock index futures such as the e-mini S&P 500 futures (ES) in that MBT futures are cash-settled to an index.

However, as opposed to stock index futures which are cash-settled to the underlying index of individual stocks, MBT futures are cash-settled to a reference rate of Bitcoin prices submitted by bitcoin exchanges and trading platforms.

What is the CME CF Bitcoin Reference Rate (BRR)?

The CME CF Bitcoin Reference Rate (BRR) is a daily standardized reference rate for Bitcoin, calculated at 4:00pm London time.

During a one-hour calculation period, BRR aggregates the trading transactions from major Bitcoin spot exchanges and trading platforms including Bitstamp, Coinbase, Gemini, itBit and Kraken. The BRR is published every day and is used for the final settlement price on the last day of trading. Micro Bitcoin futures are cash-settled against the final settlement price based on the BRR.

How is the CME CF BRR Calculated?

  • Based on actual trades submitted by spot exchanges and trading platforms
  • Published once per day at 4:00pm London time
  • Calculation window is 1 hour, from 3:00pm to 4:00pm London time
  • Calculation window is composed of 12 five-minute interval periods
  • During each 5-minute period, the Volume Weighted Median Price is calculated
  • At the end of the 1-hour period, an Equally Weighted Average Price is calculated based on the 12 five-minute interval periods
  • The CME CF BRR reference rate is calculated to the nearest $0.01 compared to the daily futures settlement which is equal to the minimum tick increment of $5 per Bitcoin

By using a volume-weighted median price per 5-minute period and then an equally-weighted average price for the full 1-hour calculation period, the BRR index ensures the integrity of the Bitcoin reference index. For example, if there are a small number of trades with very little volume which are traded at relatively wide prices, they would have little impact on the volume-weighted median price.

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