The platform's Index Price is derived from the estimated index price **(Symbol: .EXXX, XXX is represented by the respective coin's abbreviations such as BTC, ETH, XRP, or EOS) **and can be obtained from the basic data page for inverse contract and USDT contract respectively. For the purpose of writing this article, we will be using **.EBTC** (BTC inverse perpetual's index price) as an example.

To arrive at the final index price, 3 variables are required, namely **Current Quote, Original Weight and Real-time Weight. **

**Current Quote**

These figures represent the current real-live price quotes directly from the respective spot exchanges for the underlying coin asset.

**Original weight**

**.EBTC** is the sum of the weighted BTC spot trading prices from 5 major global spot exchanges, namely **Bitstamp**, **Coinbase Pro**, **Kraken, Gemini **and **Bittrex**. An original weight ** (Trade_WtO)**, as derived by each platform's respective monthly trade volume, is assigned to their respective current quote prices to determine its weighted influence on the overall calculation of **.EBTC**. To aid traders in understanding this concept, platforms A, B, and C will be used in the illustrations below.

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

**$$\text{.EBTC} = {\text{Trade WtO_A } \times \text{Spot Price_A} + \text{Trade WtO_B } \times \text{Spot Price_B} + \text{Trade WtO_C } \times \text{Spot Price_C}}$$**

**Real-time weight**

Likewise, should any one of the 5 exchange’s spot price deviate significantly from the other 4, it may potentially cause an inaccurate representation of **.EBTC **on the Bybit platform. Hence, to mitigate such effects, Bybit will also factor in the price spread between each exchange and **.EBTC** to calculate the final Index Price based on their real-time weight** (Trade_WtR)**. What this means is that the exchange with the largest price spread from .EBTC will, as a result, hold the least significant weightage on the final Index Price. Again using platforms A, B and C, please refer to the formula below.

**$$\text{Price Spread} = {\text{|Exchange's Spot Price} - .EBTC|}$$**

**An inverse square of an exchange’s price spread shall be used as the real-time weight of the exchange.**

**$$ \text{Trade WtR_A} = {{1 \over \text{Price Spread(A)}^2} \over {{1 \over \text{Price Spread(A)}^2} + {1 \over \text{Price Spread(B)}^2 }+ {1 \over \text{Price Spread(C)}^2}}} $$**

Last but not least, the Index Price shall then be derived from the sum of the Spot Price for each exchange multiplied by the respective real-time weight of Exchange. $$\text{Index Price} = ({\text{Spot Price_A}\times\text{Trade_WtR_A)}}) + ({\text{Spot Price_B} \times\text{Trade_WtR_B}}) + ({\text{Spot Price_C}\times\text{Trade_WtR_C}})$$

**Additional notes:**

Note: Bybit will only temporarily exclude an exchange from the index calculation when the following conditions are triggered:

1. The latest spot price obtained from an exchange has not changed for more than a minute. This is to remove the exchanges that are suffering from liquidity issues or are experiencing a service disruption.

2. The spot price obtained from an exchange deviates from the average price of the spot prices of the other 4 exchanges by more than 3%. This is to eliminate the occurrence of any price abnormality.

**Example 1: When Exchange's BTC prices are relatively close and has equal monthly trade volume**

$$\text{Exchange A Spot: } = {$10,048.00}$$$$\text{Exchange B Spot: } = {$10,046.00}$$$$\text{Exchange C Spot: } = {$10,056.00}$$ $$\text{.EBTC} = {1\over3} \times {$10,048.00} + {1\over3} \times {$10,046.00} + {1\over3} \times {$10,056.00} = {$10,050.00}$$$$\text{Price Spread of A} = {|{$10,048.00} - {$10,050.00}|} = $2.00 $$$$\text{Price Spread of B} = {|{$10,046.00} - {$10,050.00}|} = $4.00 $$$$\text{Price Spread of C} = {|{$10,056.00} - {$10,050.00}|} = $6.00 $$

$$ \text{Calculated A Weightage} = {{1 \over {$2.00}^2} \over {{1 \over {$2.00}^2} + {1 \over {$4.00}^2 }+ {1 \over {$6.00}^2}}} = 0.7346938775510203 $$$$ \text{Calculated B Weightage} = {{1 \over {$4.00}^2} \over {{1 \over {$2.00}^2} + {1 \over {$4.00}^2 }+ {1 \over {$6.00}^2}}} = 0.18367346938775508 $$$$ \text{Calculated C Weightage} = {{1 \over {$6.00}^2} \over {{1 \over {$2.00}^2} + {1 \over {$4.00}^2 }+ {1 \over {$6.00}^2}}} = 0.08163265306122448 $$

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

$$\text{Index Price} = \text{Calc A Weightage} \times {$10,048.00} + \text{Calc B Weightage} \times {$10,046.00} + \text{Calc C Weightage} \times {$10,056.00} \approx {$10,048.29}$$

In summary, in Example 1, since all **3 exchanges have equal mothly trade volume and have similar current quote prices**, all 3 platform's quoted prices share similar weightages inside the calculation of the final index price.

**Example 2: When one Exchange's BTC price differs from the other two Exchange but all 3 has equal monthly trade volume:**

$$\text{Exchange A Spot: } = {$10,060.00}$$$$\text{Exchange B Spot: } = {$10,040.00}$$$$\text{Exchange C Spot: } = {$10,500.00}$$ $$\text{.EBTC} = {1\over3} \times {$10,060.00} + {1\over3} \times {$10,040.00} + {1\over3} \times {$10,500.00} = {$10,200.00}$$$$\text{Price Spread of A} = {|{$10,060.00} - {$10,200.00}|} = $140.00 $$$$\text{Price Spread of B} = {|{$10,040.00} - {$10,200.00}|} = $160.00 $$$$\text{Price Spread of C} = {|{$10,500.00} - {$10,200.00}|} = $300.00 $$

$$ \text{Calculated A Weightage} = {{1 \over {$140.00}^2} \over {{1 \over {$140.00}^2} + {1 \over {$160.00}^2 }+ {1 \over {$300.00}^2}}} = 0.5041840271699171 $$$$ \text{Calculated B Weightage} = {{1 \over {$160.00}^2} \over {{1 \over {$140.00}^2} + {1 \over {$160.00}^2 }+ {1 \over {$300.00}^2}}} = 0.3860158958019677 $$$$ \text{Calculated C Weightage} = {{1 \over {$300.00}^2} \over {{1 \over {$140.00}^2} + {1 \over {$160.00}^2 }+ {1 \over {$300.00}^2}}} = 0.10980007702811527 $$

Hence, .BTCUSD Index Price will be the following:

$$\text{Index Price} = \text{Calc A Weightage} \times {$10,060.00} + \text{Calc B Weightage} \times {$10,040.00} + \text{Calc C Weightage} \times {$10,500.00} \approx {$10,100.59}$$

In summary, unlike Example 1, **when Exchange C's current quote price is much higher** relative to the .EBTC in Example 2, the influence that Exchange C has on the final Index Price is also relatively reduced in weightage to reflect its price variance.