Citi, SG and DrKW to market make iBoxx; new index launched

Citigroup, Dresdner Kleinwort Wasserstein (DrKW) and Société Générale will make markets in indexes provided by bond and credit default swap index company iBoxx. They join two existing providers, ABN Amro and Deutsche Bank, and should help improve liquidity in the index as part of a mounting challenge to Trac-x - the credit derivatives index run by JP Morgan Chase and Morgan Stanley.

The index provider has also launched a new index, called iBoxx Diversified, a European index comprising 100 companies across 31 sectors. The index is aimed at the fund management and end-user community, including retail investors. It was introduced to allow investors to access a more diversified range of European corporates. The new index acts as an accompaniment to the existing iBoxx 100, which references the 100 biggest corporates in the market and the iBoxx Corporate index, which includes the 100 biggest non-financial names.

Asked if iBoxx will be able to compete with the Trac-x index, Charlie Longden, global head of structured trading at ABN Amro, said: “There is room for two indexes at the moment, but not much more. In due course one will emerge as the benchmark.”

Citigroup last month mooted the idea of launching its own credit derivatives index, but was persuaded to join iBoxx by the relative liquidity of the index. Allan Shaffran, head of European credit derivatives at Citigroup, said: “We believe a wide range of our clients will be attracted to iBoxx’s strong brand, rules-based approach and the market support of a broad market-making group.”