Nasdaq on-boards BNC’s LX indices in bid for market price transparency

Under the guidance of its CEO Adena Friedman, who is famously bullish on blockchain tech, Nasdaq is taking the lead in bringing transparency to cryptocurrency trading and assisting to open up the sector to a wider audience. Nasdaq is also the market surveillance partner of the Gemini exchange, the New York based crypto exchange founded by Tyler and Cameron Winklevoss.

BLX and ELX creating price transparency

From a regulatory perspective, opacity in the crypto spot markets is a major concern for regulators evaluating Bitcoin and Ethereum ETF proposals, which once approved could potentially be hosted on the Nasdaq exchange.

The Commodity Futures Trading Commission (CFTC) has issued several warnings about valuations and volatility in the spot markets which may also have hampered adoption of the existing bitcoin futures contracts.

To this end, Nasdaq is bringing the same types of surveillance processes and technologies used in the traditional capital markets to help protect investors trading on digital asset exchanges.

The BLX (orange line) is an aggregate of bitcoin spot prices on six of the biggest exchanges; here it shows the Bitfinex premium of ~$100 over its peers.

Brave New Coin CEO Fran Strajnar says the new asset class of cryptographic currencies and assets is global and has a diverse liquidity profile. To ensure transparency and relevancy, he says, it is therefore important to "consider the geographical and technological diversity of crypto" when calculating a global price index.

BNC’s ‘Liquid Index’ (LX) indices are part qualitative and part quantitative, factoring in the stability and quality of constituency as well as the volume, book depth, tick size and other factors from the qualified market participants, to calculate a fair global value for the price of Bitcoin and Ethereum, expressed in USD, every 30 seconds.

The ‘LX’ family of BNC indices has had its methodology independently audited against key IOSCO (International Organisation of Securities Commissions) principles says Strajnar. "BNC endorses the IOSCO principles and fully embraces the IOSCO’s goals of addressing the obvious conflicts of interest in the benchmark-setting process, which the nascent crypto industry is vulnerable to."

Data for the ELX goes as far back as July 2015, around the time of genesis of Ethereum.

Using the BLX and ELX as a universal price benchmark

Nearly every asset class has a price benchmark, Nasdaq for tech stocks and the London Bullion Market for gold and other commodity metals. In oil, the most watched price for Middle Eastern crude is the Platts Dubai quote. Although Bitcoin has been deemed a "virtual commodity" by the CFTC since 2015, there is still great price disparity between exchanges and countries, diverging by as much as US$1,000 at any time. Strajnar says the inclusion of audited crypto indices like Brave New Coin’s BLX and the ELX on the Nasdaq Data Service will provide the pricing benchmark information that participants in the blockchain and cryptocurrency sector need.

The end-of-day price of the BLX shows bitcoin’s price and order book liquidity across the most liquid global exchanges. Charting by: TradingView.com

Outside of the Bitcoin and Ethereum Liquid Index, BNC is in the final stages of producing the RLX (Ripple Liquid Index) and is working with a range of market participants to create custom basket indices. Strajnar says regional specific indices are also available, and that BNC will roll out the LX program to other liquid currencies and assets in due course.

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