The Chicago Board Options Exchange (CBOE) has partnered with CoinRoutes to use RealPrice BBO. The real-time feed provides the best executable prices for assets from key Bitcoin exchanges. According to the press release, based on this data stream CBOE plans to create new indices and instruments.
CoinRoutes, the trading software provider, has filed for a patent for the technology in question. Under the agreement, CBOE will hold exclusive rights to use the RealPrice BBO data. The exchange plans to launch instruments based on this solution by the end of 2021.
The U.S. Securities and Exchange Commission (requires) brokers to guarantee execution for client orders only at the best prices.
“RealPrice data can help in creating indices and instruments that help clients better understand cryptocurrencies and stimulate their participation in the nascent asset class,” said Catherine Clay, Senior Vice President and Head of Information Solutions at Cboe Global Markets.
The exchange expects that initially the new indices will attract interest from “thousands of clients.” With a global user base, the number is expected to rise substantially over time.
The unit led by Clay plans to use RealPrice for portfolio-construction tools, pre-trade preparation, cost estimation, risk analytics for lenders, and as historical data for back-testing.
The RealPrice methodology is designed to be sensitive to both the level of fees and the tick size. The latter is particularly important given that this measure is minuscule relative to the asset price. Consequently, RealPrice allows for a more accurate representation of net asset value (NAV) and indices and, as a result, a more precise reflection of the liquidity pool.
“We believe that existing indices that do not account for various fees or the actual liquidity available on crypto trading venues do not reflect the true cost of buying or selling a given cryptocurrency. Unlike them, RealPrice displays the executable bid and ask prices for specific order sizes. We believe this is better than assuming what could be executed on each platform,” said Michael Holstein, Chief Commercial Officer of CoinRoutes.
In an interview with The Block, Dave Weisberger, head of the trading-software provider CoinRoutes, suggested that the partnership with CBOE could loosen the SEC’s stance on launching a Bitcoin ETF. He argues that RealPrice addresses a number of issues previously highlighted by the agency, including a level of transparency that “should prove decisive for the regulator.”
“RealPrice is far less prone to manipulation than Bitcoin indices. This is because weighting is not arbitrary but based on the actual executable order book. Secondly, having access to all of our cross-market data, CBOE will be able to flag odd price discrepancies across markets,” he explained.
RealPrice, at the same time, does not address other concerns raised by the SEC regarding Bitcoin ETFs, including custody and exchange hacking.
Earlier in 2021, the launch of its own cryptocurrency indices was also plans S&P Dow Jones Indices, a unit of the American data provider S&P Global. Details on how this will affect the Bitcoin industry can be read in our special feature.
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