CDS IndexCo and Markit Launch the LCDX Tranches
Investors Can Now Gain or Hedge Exposure to Specific Tranches of Loan-Only Credit Default Swaps
NEW YORK, NY – 10 October 2007 – CDS IndexCo LLC (“CDS IndexCo”), a consortium of 16 investment banks licensed as market makers in the ABX, CDX, CMBX and LCDX indices, and Markit Group Limited (“Markit”), the leading provider of independent data, portfolio valuations and OTC derivatives trade processing to the global financial markets, today launched the LCDX Tranches -- standardized, tradable tranches of the North American loan credit default swap index.
The LCDX Tranches will provide investors with a universe of tradable instruments that will open up a range of new trading strategies to suit individual risk appetites. For the first time, investors will be able to hedge or gain exposure to various tranches of the LCDX index through a transparent, multi-dealer product. Today was the first day of trading and it is estimated that the participating market-makers traded over $2.5 billion notional of LCDX Tranches.
“The launch of the LCDX Tranches marks the next step forward in offering standardized loan credit derivatives which will promote liquidity and operational efficiency in the marketplace,” said Kevin Gould, executive vice president and head of data products and analytics at Markit. “Much like the tranched CDX and ABX, the new LCDX Tranches allow investors to express an outright long or short view on a specific risk profile within LCDX, and to trade senior secured correlation both outright and against its unsecured equivalents in CDX IG and HY tranches.”
“We’re continuing to push forward with innovations that allow investors to take more nuanced positions with respect to risk,” said Brad Levy, managing director at Goldman Sachs and acting Chairman of CDS IndexCo. “Today’s volume, as well as the large turnout at our investor kick-off conference call yesterday, reflects the strong demand the dealers have been seeing for these instruments.”
The initial series of the LCDX Tranches will reference the underlying names of the LCDX index and will comprise the same 100 reference entities in the current LCDX Series 9.
Attachment points for the LCDX Tranches will be 0-5%, 5-8%, 8-12%, 12-15% and 15-100%. The 0-5% and 5-8% tranches will be quoted on an upfront basis with the other tranches quoted in spread terms. The composition will be based on the LCDX index for any given series, and the tranches will roll in line with the LCDX.
Markit will act as administration, calculation, and marketing agent for the LCDX Tranches, a remit which spans pricing, analytics, operations, public relations and marketing.
The investment banks launching the index and acting as market-makers are: Bank of America; Barclays Capital; Bear Stearns; Citigroup; Credit Suisse; Deutsche Bank; Goldman Sachs; JPMorgan; Lehman Brothers; Merrill Lynch; Morgan Stanley; and UBS.
For information on the LCDX Tranches, see www.markit.com or contact:
CDS IndexCo
Michael Mandelbaum
Tel: +1 310 785-0810
Email: michael@mandelbaummorgan.com
Markit
Teresa Chick
Tel: +44 20 7260 2094
Email: teresa.chick@markit.com
About CDS IndexCo
CDS IndexCo is a consortium of 16 investment banks which are licensed as market makers in the ABX, CMBX and CDX indices. The market makers include: ABN AMRO, Bank of America, Barclays Capital, Bear Stearns, BNP Paribas, Citigroup, Credit Suisse, Deutsche Bank, Goldman Sachs, HSBC, JPMorgan, Lehman Brothers, Merrill Lynch, Morgan Stanley, UBS, and Wachovia.
About Markit
Markit is the leading provider of independent data, portfolio valuations and OTC derivatives trade processing to the global financial markets. The company receives daily data contributions from 90 dealing firms, and its services are used by almost 1,000 institutions to enhance trading operations, reduce risk and manage compliance.
For more information, see www.markit.com