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Oct 19, 2023

CF Rolling CME Futures Index Series expands, with launch of Bitcoin Ether Basket

Our first rolling futures basket index provides hands-off, regulated exposure to crypto mega caps

CF Benchmarks is expanding its range of regulated indices that replicate serial investments in CME Group cryptocurrency futures, with the launch of the CF Rolling CME Bitcoin Ether Basket Futures Index (Excess Return).

Why CF Rolling CME Futures?

Institutional needs

Like existing benchmarks in our CF Rolling CME Futures Indices Series, the CF Rolling CME Bitcoin Ether Basket Futures Index was created in response to institutional investors’ increasing need for continual investment in CME Group cryptocurrency futures contracts.

These indices are ideal for institutions seeking exposure to digital assets, but who wish to avoid transacting on unregulated spot cryptocurrency markets.

Likewise, investors prohibited from handling crypto for regulatory reasons, such as banks, can use our rolling futures index series to participate in digital asset returns without needing to touch cryptocurrencies.

Now, the CF Rolling CME Bitcoin Ether Basket Futures Index enables institutional investors to access both bitcoin and ether exposure simultaneously, with an entirely hands-off strategy.

Regulated environment

Another reason why the CF Rolling CME Bitcoin Ether Basket Futures Index is ideally suited for institutions, is because it maintains the unique end-to-end regulated environment within which CME Group derivatives participants operate:

  • CME Group cryptocurrency futures contracts, for both bitcoin and ether, and the trading venue itself, are regulated by the CFTC
  • CME Bitcoin Futures and CME Ether Futures are cash-settled against the CME CF Bitcoin Reference Rate (BRR) and the CME CF Ether Reference Rate (ETHUSD_RR), respectively, both of which are registered, regulated benchmarks
  • These indices are calculated and published by CF Benchmarks, a Benchmark Administrator authorized under both EU and UK Benchmarks Regulation (BMR) frameworks, and regulated by the UK FCA

How it works: methodology

The Basics

Whilst the index’s constituent indices do not observe transactions of physical bitcoin for U.S. dollars (USD) and ether for USD as input data, they still represent the underlying economic reality of the exchange of bitcoin for USD and ether for USD, as outlined below.

The CF Rolling CME Bitcoin Ether Basket Futures Index tracks the performance of a basket consisting of two CF Rolling CME Futures Series indices:

  • CF Rolling CME Bitcoin Futures Index (Excess Return)
  • CF Rolling CME Ether Futures Index (Excess Return)

The index is calculated once a day and published at 15:20 U.S. Central Time.

The basket’s constituents are weighted by their respective free float market capitalizations, and rebalanced quarterly.

How we roll: optimized strategy

The CF Rolling CME Bitcoin Ether Basket Futures Index deploys an optimized roll strategy to accurately replicate returns of a simultaneous, continual holding of CME Bitcoin Futures and CME Ether Futures contracts.

Through an index construction that spreads allocation across both the front and second months of each contract, as well as rolling contracts during the most liquid days in the run up to expiry, the index negates the effects of roll yield significantly, providing strong replication of physical bitcoin and physical ether prices.

Meanwhile, the roll price mechanism is designed to prevent manipulation, particularly front-running.

Note that this roll strategy is ‘fully coded’, and just like the rest of the index’s methodology, transparent and publicly available.

Furthermore, the CF Rolling CME Bitcoin Ether Basket Futures Index utilizes a free float market cap rebalancing schedule that’s neatly tied to the roll schedule stipulated by its methodology, reducing operational load further.

Potential Uses

The index methodology is underpinned by the aim to provide a representative, replicable and efficient means of facilitating the creation of financial products, including but not limited to some of the specific potential use cases below:

  • Performance benchmarking of actively managed portfolios of digital assets and the determination of relative performance
  • Passive replication in investment funds, financial instruments and products
  • Settlement of financial instruments, including derivative contracts
  • Valuation or 'marking to market' portfolio holdings of digital assets

Find out more

Watch our new CF Rolling CME Futures Index Series video!

Understand the constituent indices

The information contained within is for educational and informational purposes ONLY. It is not intended nor should it be considered an invitation or inducement to buy or sell any of the underlying instruments cited including but not limited to cryptoassets, financial instruments or any instruments that reference any index provided by CF Benchmarks Ltd. This communication is not intended to persuade or incite you to buy or sell security or securities noted within. Any commentary provided is the opinion of the author and should not be considered a personalised recommendation. Please contact your financial adviser or professional before making an investment decision.

Note: Some of the underlying instruments cited within this material may be restricted to certain customer categories in certain jurisdictions.