Centralised Exchanges

Ranking Methodology Overview

Aggregation and Grading - Centralised Exchanges

Scores from each category are aggregated to form a total cumulative score. The maximum score is 100.

Category	Maximum Points	Minimum Threshold
Security	15	10 (67%)
Legal/Regulation	15	9 (60%)
KYC/Transaction Risk	15	9 (60%)
Data Provision	15	-
Asset Quality/Diversity	5	3 (60%)
Team/Company	5	-
Market Quality	20	11 (55%)
Transparency	10	-
Negative Penalty	-3	-
Total Cumulative Points	100

Score	Grade
>75	AA
70-75	A
65-70	BB
55-65	B
45-55	C
35-45	D
25-35	E
<25	F

Minimum Threshold for AA-A Status

To ensure that only the lowest risk exchanges achieve AA - A status, we have created minimum thresholds across certain categories, including:

11 or above for Market Quality
10 or above for Security
9 or above for KYC/Transaction Risk, Asset Quality/Diversity, and Legal/Regulatory (each is one threshold)
No major negative penalties

If an exchange breaches one threshold, then its score is capped at 75 (i.e. an A ranking). If an exchange breaches two thresholds, their score is capped at 70 (i.e. a BB ranking).

CEX Methodology Overview - Ranking Components

The overall ranking consists of the following components and subsequent weightings:

Security
Legal/Regulation
KYC/Transaction Risk
Team/Exchange
Data Provision
Asset Quality/Diversity
Market Quality
Transparency
Penalty Factor: Negative Events (-5%)

Time Period: 01 October 2023 - 31 March 2024

Sources:
VASPnet regulatory database
LinkedIn profiles
Crunchbase profiles
Exchange sites & APIs
Github/other API documentation
Companies house
Media websites
MSB registries
Security registries
Independent auditors
Financial statements & attestations
Nansen
Semrush & SimilarWeb

Method: Manual Data Collection, Exchange Due Diligence Form, Partnerships, Exchange Data Sharing Agreements

Time Period: 01 October 2023 - 31 March 2024

Sources: CCData Exchange OHLCV Data

Market Quality: We evaluate the market quality of each exchange by combining volume figures and various metrics (derived from trade and order book data) to measure the cost to trade, liquidity, market stability, response to sentiment, and "natural" trading behavior.

Exchanges are rated based on their top five markets by trading volume. Points are assigned using a proprietary mathematical function that considers the aforementioned data. This process results in a comprehensive ranking that remains robust across various markets for each exchange

Time Period: 01 October 2023- 31 March 2024

Sources: CCData Exchange Order Book Data

Market Quality: We leverage our market-leading order book data to provide unparalleled liquidity insights, enhancing market quality benchmarks across 30+ exchanges.

Utilising precise metrics such as slippage, spread, and depth calculated at granular intervals, and empowered by high-frequency, real-time updates and comprehensive smart snapshots, our tools offer in-depth analysis capabilities to assess and improve trading dynamics effectively.

CEX Methodology Overview - Data Collection

CEX Methodology Overview - Components I

The Methodology components break down the key metrics for evaluation within the Exchange Benchmark, driven by vigorous research and discourse with industry leaders, incorporating new developments and best practices to form an overall assessment of category risk.

Security

15%

Formal security certificate
SSL rating
Offline storage
Percentage of funds in cold wallets
Geographical distribution of keys
2 factor authentication (2FA)
Exchange hacks
Bug bounty programs (inc. max rewards)
Custody provider (regulated and audited)
Off-exchange settlement

Legal/Regulation

15%

VASPnet - Registered as an MSB/license
VASPnet - Regulatory stringency/License Score
Part of regulatory/industry group
Insurance against losses (fiat and crypto)
Sanctions compliance statement
PEP compliance statement

KYC/Transaction Risk

15%

Market surveillance systems (Internal & External)
Transaction monitoring systems (Internal & External)
Tier-1 accounts maximum withdrawals
Strict KYC/AML procedure assessments

CEX Methodology Overview - Components II

Team/Exchange

5%

Identity of CEO, CTO, CCO, CISO (or equivalent)
Education - Masters degree/formal post-graduate certification
Years of experience
Exchange age
Customer service
Institutional/corporate/retail offering

Data Provision

15%

API average response time (ms)
Ability to query historical trades
Historical candlestick data
Granularity of candlestick data
Offers websocket or FIX connection
Provides order book API endpoint
Maximum order book level offered
API rate limits
Ease of API use
API data quality
API trading

Asset Quality/Diversity

5%

Average asset quality based on Crypto Asset Scores by TokenInsight
Number of assets available on the platform
Transparency of asset listing procedures

CEX Methodology Overview - Components III

Market Quality

20%

Market cost to trade (average spread)
Liquidity (average depth + adjustments)
Stability (minute volatility)
Behaviour towards sentiment (volatility and volume correlation)
Natural trading behaviour (volume standard deviation)
Index Score (deviation from reference rate)
Average monthly volumes
Adjusted volumes score
Market maker incentives
Flash crashes

Transperancy

10%

Available proof of reserves
Audited proof of reserves
Available proof of liability
Frequency of proof of reserves/liability
Number of assets in proof of reserves
Public wallet addresses
Audited financial statements
Management & ownership
Communication transparency

Negative Events

Penalty Factor - 5%

Negative events
Type of negative event (data breach, major or minor fine, withdrawal freezes, lawsuits, others)

Derivatives Based Components

Market Quality

20%

Availability of an insurance fund
Socialised loss mechanism
Partial liquidation mechanism
Margin mechanics
Futures settlement mechanics
Future type availability
Option availability
Market maker incentives
Average monthly volume
Average monthly open interest

Data Provision

10%

Meta data availability
Historical backfill
Ease of API use
API data quality

Asset Diversity

5%

Number of future products
Number of options products

* Only three Categories have been changed for derivatives. The rest of categories remains consistent between the spot and derivative Exchange Benchmark, including:

Security, Legal/Regulation, KYC/Transaction Risk, Transparency, Team & Exchange, Negative Events.