CDS IndexCo and Markit Announce Roll of the ABX.HE Indices
New York, NY - CDS IndexCo LLC (“CDS IndexCo”), a consortium of 16 investment banks that combined to create tradable synthetic indices, and Markit Group Limited (“Markit”), the leading provider of independent data, portfolio valuations and OTC derivatives trade processing, announced that the ABX.HE, a synthetic index of U.S. home equity Asset-Backed Securities (ABS) will roll tomorrow, July 19, 2007. The new series ABX.HE 07-2, reference a new set of underlying deals issued within the first half of 2007.
Unlike the CDX and iTraxx indices where the roll concept is designed as a way for investors to retain exposure to the most liquid series of credits and where rolling from one series to the next has historically changed one's exposure by only 3-5%, ABX.HE is designed so that each series provides a unique vintage profile.
Additional details and considerations concerning the roll of the ABX.HE indices, as well as a complete list of reference obligations, coupons and index RED codes can be viewed at: www.markit.com. ABX.HE will next roll in January 2008.
Markit, in its role as calculation agent, is currently working on an enhanced version of its ABX Calculator, which is used for the settlement of ABX index trades. The first set of enhancements will be available to users on August 4, 2007.
Ben Logan, Managing Director, Structured Finance at Markit, said: “The ABX.HE indices have helped build liquidity in the market for credit default swaps referencing sub-prime mortgage-backed securities. With increased liquidity has come increased demand for tools needed to analyze synthetic ABS. Our ABX Calculator has now become the industry standard and we are working on an enhanced version with added analytical functionalities to bring further transparency and efficiency to the market.”
The ABX Calculator currently allows dealers to agree on a net present value exchange for entering index trades and gives them a greater insight into the impact of spread and prepayment on the value of their trades. Once the first set of enhancements is live, users will also be able to manage their default assumptions. The new default-related inputs will include CDR, Loss Severity and Delinquency Percentage.
Markit is also working on versions of the ABX Calculator which will allow for dynamic cashflow generation and will include credit-related scenario inputs so that cashflows will be generated using both prepayment and default assumptions. Further enhancements will include adding user-defined prepay and default scenarios as well as the ability to run multi-scenarios and single names. The ABX Calculator is free to market participants.
Markit is the administration, calculation, and marketing agent for the ABX.HE indices. This broad remit includes, as well as supplying a calculator for the analysis and settlement of trades: capturing daily price fixings, publishing monthly fixed and floating payments; handling rules, operations, marketing, and analytics; negotiating dealer and data licenses, and communicating information to the wider market.
Licensed Dealers in the ABX.HE indices include the following: ABN AMRO; Bank of America; Barclays Capital; Bear Stearns; BNP Paribas; Calyon; Citigroup; Credit Suisse; Deutsche Bank; Goldman Sachs; JPMorgan; Lehman Brothers; Merrill Lynch; Morgan Stanley; RBS Greenwich; UBS; and Wachovia.
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For additional information regarding this press release please contact:
Markit
Ben Logan
Tel: +1 212 931 4925
Email: ben.logan@markit.com
CDS IndexCo
Michael Mandelbaum
Tel: +1 310 785 0810
Email: Michael@mandelbaummorgan.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 Group Limited (“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 over 85 dealing firms, and its services are used by almost 1,000 institutions to enhance trading operations, reduce risk and manage compliance.