The LCDX index of North American loan credit default swaps (LCDS) saw trades totalling over $11 billion notional during its debut on May 22, according to London-based data provider Markit.The index comprises 100 equally weighted North American LCDSs that reference syndicated first-lien loans, selected by dealers for their liquidity. The names were plucked from a list maintained by Markit, which acts as calculation agent for the index. It has semi-annual roll dates in April and October and a fixed coupon, initially set at 120 basis points.
At its launch on May 22, dealers in New York reported a high level of activity in the new product, with around $1.5–2 billion notional traded between 7.00 and 9.00am alone. By 4.00pm, spreads on it had tightened to 104.6 bps, according to Markit.
The LCDX was launched by bank consortium CDS IndexCo, after the International Swaps and Derivatives Association finalised documentation for US LCDS index trades and revised standards for US single-name LCDSs.
“Isda has high expectations for the index,” said Robert Pickel, chief executive of the association. “The launch of LCDX addresses credit derivatives index settlement issues by ensuring strong liquidity and acting as an efficient means of hedging credit exposure.”
Isda is preparing a protocol for rolling legacy LCDS trades to the new standard, as well as documentation for LCDX tranches. Since the end of 2006 a working group has also been developing revised LCDS documentation for Europe. This was expected in May, but Isda said the group now plans to finalise it in June.
More on Structured Products
Index makers comply with Iosco benchmark principles
Boost lists Europe’s first 10-year UST 3x short fixed-income ETP on LSE
Euro-denominated actively managed funds do not outperform benchmarks
Vontobel looks to replicate the success of its European platform in Asia
Sign up for Risk.net email alerts
Nominated for two technology awards
Nominated for post trade technology award
Sponsored webinar: Collateral and counterparty tracking
Isda directors warn on fragmentation, access and liquidity - but expect problems to pass
There are no comments submitted yet. Do you have an interesting opinion? Then be the first to post a comment.