Spot Price Usability Verification：

Upon receiving the Spot Price from the respective reference Exchange, we will first evaluate the usability of the price upon two criteria, ** Time** and

**.**

__Price relevance__- Time criteria, the spot price from an exchange will be excluded should the exchange suffers from liquidity issue, or should the exchange encounter any service disruption resulting in delayed price feedback:

Should there be an absent in update for more than 15 mins in transaction information/order book, the exchange will be temporarily excluded from the index price calculation until its data feedback has been restored or refreshed.

- Price relevance, the spot price from a reference exchange will be excluded should the exchange experience abnormal price movement. Even if the exchange fulfils the time criteria, the exchange will still be excluded in order to prevent any erroneous price being utilised in the Index Price

- When there are 3 or more reference exchange: If Exchange A’s spot price deviates from the median more than the tolerance threshold (3% for BTCUSD and 5% for the remaining trading pairs). Even if Exchange A fulfils the time criteria, the exchange will still be excluded.
- When there are only 2 reference exchange: Should the spot price obtained from Exchange A deviates from the median price comprising of Exchange A spot price, Exchange B spot price and the last Index Price. Should Exchange A's spot price have a deviation from the median greater than 3% for BTCUSD and 5% for other trading pair, Exchange A's spot price will be excluded.
- When there is only one reference exchange (Exchange A): If the spot price obtained by Exchange A deviates by more than 10% from the previous latest index price, the index price is maintained.

**The reference exchange that fulfils both the time and price relevance criteria will be used in a weighted average calculation method of the index price based on the following:**

Reference Exchange’s Weighted Average Calculation：

In order to ensure that Index Price closely reflects the market price of the underlying asset, the weighted average of the reference exchange is determined by the following two steps:

- Using the weighted average trading volume and multiplying this against their respective exchange spot price we can obtain the estimated Index Price. The weighted average trade volume of each reference exchange is obtained from the combined total volume of trades (in USD) from all the reference exchange within the past 1 month. It is calculated and updated at UTC 2400 on the 1st of each month and applied to the new index price calculation after 72 hours.

Formula:

$$ \text{Trade Wt_A} = {{ \text{Av. Monthly Trade Vol. (A)}} \over {{\text{Av. Monthly Trade Vol. (A)}} + { \text{Av. Monthly Trade Vol. (B)} }+ { \text{Av. Monthly Trade Vol. (C)}}}} $$

$$\text{.EBTC} = {\text{Trade Wt_A } \times \text{Spot Price_A} + \text{Trade Wt_B } \times \text{Spot Price_B} + \text{Trade Wt_C } \times \text{Spot Price_C}}$$

- Based on the estimated index price, calculate the spread between the BTC spot price and the estimated index price of each reference exchange. Factor in the price spread between each exchange and
*.EBTC*to calculate the**Index Price**. The exchange with the largest price spread from*.EBTC*will hold the least significant weightage on the**Index****Price**. An inverse square of an exchange’s price spread shall be used as the adjusted weight of the exchange.

The Index Price shall then be derived from the sum of the Spot Price for each exchange multiplied by the respective Weight of Exchange

$$\text{Index Price} = ({\text{Exc A} \times\text{W_A)}}) + ({\text{Exc B} \times\text{W_B}}) + ({\text{Exc C} \times\text{W_C}})$$

Index Price Calculation Example：

The weight for the past month's trade: Spot A: 60%, Spot B: 30%, Spot C: 10%

At a certain time，

$$\text{Exchange A Spot: } = {$10,048.00}$$$$\text{Exchange B Spot: } = {$10,046.00}$$$$\text{Exchange C Spot: } = {$10,056.00}$$

$$\text{.EBTC} = {0.6} \times {$10,048.00} + {0.3} \times {$10,046.00} + {0.1} \times {$10,056.00} = {$10,048.20}$$

$$\text{Price Spread of A} = {|{$10,048.00} - {$10,048.20}|} = 0.20 $$$$\text{Price Spread of B} = {|{$10,046.00} - {$10,048.20}|} = 2.20 $$$$\text{Price Spread of C} = {|{$10,056.00} - {$10,048.20}|} = 7.80 $$

Exchange calculated weightage based on Price Spread：

$$ \text{Calculated A Weightage} = {{1 \over {0.20}^2} \over {{1 \over {0.20}^2} + {1 \over {2.20}^2 }+ {1 \over {7.80}^2}}} = 0.9911569718282726 $$$$ \text{Calculated B Weightage} = {{1 \over {2.20}^2} \over {{1 \over {0.20}^2} + {1 \over {2.20}^2 }+ {1 \over {7.80}^2}}} = 0.008191379932519243 $$$$ \text{Calculated C Weightage} = {{1 \over {7.80}^2} \over {{1 \over {0.20}^2} + {1 \over {2.20}^2 }+ {1 \over {7.80}^2}}} = 0.000651648239208198 $$

Hence, .BTCUSD **Index Price **will be the following:

$$\text{.BTCUSD} = \text{w_A} \times {$10,048.00} + \text{w_B} \times {$10,046.00} + \text{w_C} \times {$10,056.00} \approx {$10,047.99}$$

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