Trading shutdown hits ABS index launch

Problems in the European asset-backed securities market have caused Markit Group to delay the launch of its new European residential mortgage-backed index indefinitely.

Markit says it is working with a group of dealers on documentation for the European index, but that feedback from market participants was unequivocally in favour of dropping the launch given the current volatility.

The index - the ERMBX.UK - is designed to reference synthetic UK prime mortgage-backed securities. Though the UK MBS market is said to be in marginally better health than other European markets, there is insufficient activity to justify a launch.

"It is Markit's desire to create an index that will attract market support and be actively traded," says Ben Logan, managing director of structured finance at Markit in New York. "We will continue to work towards completing the documentation for the index and will update the market on any decisions that are taken about the launch in due course."

"European ABS is suffering," says one market participant. "Everyone wants the ERMBX to be successful and liquidity is an important part of that."