Executive Summary

Corporations, Financial Markets and other financial institutions often utilise various indices not only to track the markets and identify investment opportunities, but also to build investment products. Indices increase market transparency, enable diversification, support risk management and decision-making activities. This is no different for the digital asset markets, as its recent growth has led to a noticeable increase in the building and managing of indices.

CryptoIndexSeries offers Index Calculation & Administration services to institutions requiring custom made indices based on specific needs.

Calculating and managing indices requires a vast collection of data, real time data feeds, expertise, and resources for monitoring the markets and rebalancing the components of the index. The latter becomes more cumbersome for digital assets, due to the market’s nascency and high volatility.  Here are some of the specific challenges in this area:

• Having a separate data provider (for pricing data), an index calculator and an index administrator may bring stakeholder management and coordination challenges.

• Real-time data is difficult to collect, distribute and manage. Having a trustworthy data channel is extremely important.

• Defining an index methodology requires expertise in many areas including, but not limited to, defining how data updates are defined, selecting calculation techniques (eg. Paasche), laying down constituent selection & rebalancing rules. In all these areas, finding the right resources with the required knowledge and expertise can take time and may be costly.

• In addition to creating Digital Asset indices and Market Indices, Sector or Segment indices (eg. Defi Index, Metaverse Index) have gained popularity. In order to create such specific baskets of assets in the form of indices, further taxonomic data is required to classify and select the right constituents.

Finally, financial institutions looking to invest in indices or aiming to offer such services to their clientele would need to focus on their strategic objectives rather than building such indices in-house as this additional effort to build an expert index team may leave them behind their competitors.

The CryptoIndexSeries Index Calculator and Administrator services bring significant benefits to overcome the challenges to create and maintain robust indices for the Digital Asset Markets.

There are certain processes and tasks involved before an index can be utilised as an underlying for a fund or another financial instrument. These processes include, but not limited to, the following four main areas:

• Index Methodoogy Setup
• Data Sourcing
• Index Calculation
• Index Maintenance

The Index Methodology can be setup by the Index Owner or the party who sponsors the index. In most cases, the involvement of an index administrator and an index calculator simplifies and quickens this process. CryptoIndexSeries has created Proprietary Digital Asset Indices and has vast knowledge in this area.

For the Data Sourcing process, usually the Index Administrator outsources a third party data vendor. As for CryptoIndexSeries, we source our own data from our own proprietary Digital Asset Data API, hence the quality of the data is also guaranteed by us.

The Index Calculation and Index Maintenance processes are usually handled by the Index Calculator under the supervision of an Index Administrator. These processes include tasks such as calculating the index, archiving the data for historical purposes, back-calculating the index to relevant start date,  reviewing the index periodically, implementing the necessary actions accounting for extraordinary events, etc. CryptoIndexSeries already carries out these tasks for our Proprietary Indices, follows the markets for proper & timely maintenance actions and handles the required tasks in the most effective and quick manner.

An information leaflet outlining the full list of processes and tasks we carry out as an Index Calculator and Administrator is available here.

A sneak peak to our Index Methodology Guide is available here.

* Please note that Index Administrators need to comply with certain Benchmark Regulations in certain jurisdictions. Please contact us should you need information about our efforts in this regard for your jurisdiction.