To qualify for index selection, the following criteria have to be met: deals must be secured by at least 50 mortgages that are obligations of a minimum of 10 unaffiliated borrowers; no more than 40% of the underlying mortgages can be secured by properties in the same state; and no more than 60% of the properties can be of the same property type. A new series of CMBX will be issued every six months.
Markit, a St Alban’s-based independent pricing and valuations specialist, will then poll CMBX dealers to verify the basket’s liquidity. It will be responsible for the day-to-day operation of CMBX’s rules and analytics. It will publish prices daily on its website, markit.com, using cashflows from Trepp, a provider of commercial mortgage analytics and technology, and will provide monthly fixed and floating payment amounts as well as supply a calculator for the settlement of trades.
“The market for CDS of CMBS has been growing rapidly for several months and we expect CMBX to provide market participants with new ways to take synthetic exposure to the CMBS market,” said Bradford Levy, acting chairman of CDS IndexCo and head of Goldman Sachs’ e-commerce group in New York. “CMBX is a tradable benchmark that will give clients a liquid and standardised tool for trading and structuring.”
The market-makers in the index will be: Bank of America, Bear Stearns, Citigroup, Credit Suisse, Deutsche Bank, Goldman Sachs, JP Morgan, Lehman Brothers, Merrill Lynch, Morgan Stanley, Nomura International, RBS Greenwich Capital, UBS and Wachovia.
CMBX consists of five tradable indexes, based on the 25 most recent CMBS deals. Each of the indexes is referenced to different rated tranches of CMBS notes – AAA, AA, A, BBB and BBB-. They are selected through an algorithm, which identifies the most recently issued deals that meet the specific size and diversity criteria.