BNC’s XRPLX is constructed using pricing data from actual trades and exchange order books. Real-time trade data is captured, formatted and then scrubbed for outlier transactions. Anomalous transactions are tagged and stored but have no influence over the index calculation. The constituent order books are also sampled, both bid and ask, to establish the depth of liquidity.
The XRPLX calculates a USD price point for XRP at tick intervals of 30 seconds. After data filtering, the volume weighted price for each constituent is obtained from the set of trades in each tick. The BTC constituents are converted to USD with the rate sourced from BNC’s Bitcoin Liquid Index.
The constituent USD prices are then weighted according to three variables:
- Moving total trade volume
- Order book depth
- Constituent historical performance
This factor weighting ensures the index is responsive to sudden market movements, while also limiting the impact of outlier transactions and market interruption events. The result is a superior index reporting legitimate XRP trading activity globally.
While the weightings are adjusted algorithmically, there are a series of qualitative factors that are applied on top of the quantitative method. These are reviewed every three months. The performance of each constituent through the previous period is analysed and ranked. Ranking factors include:
- Daily average transaction volume
- Daily average number of trades
- Daily average order book depth
- Daily average tick presence
Additional consideration is also given to an exchange’s response to any security breaches and whether it has been subject to any independent audit during the review period.