International Index Company Ltd. (IIC) has licensed its European iTraxx indices, which are based on European credit default swaps (CDS), to Eurex.
IIC is the leading provider of credit derivative and fixed income indices. Eurex intends to list an exchange-traded credit derivative product based on the iTraxx Europe CDS index, comprising 125 credit default swaps on European entities, by the end of the year.
Eurex and IIC are working together closely with market participants to develop this innovation. An exchange-traded contract is widely considered to be a major step in the shaping of the global credit derivatives market. Credit derivatives offer market participants the opportunity to hedge against credit events, such as corporate defaults, failure to pay or restructuring.
"This licensing agreement serves as the basis for further expansion of Eurex's product portfolio and increased risk management opportunities for wholesale customers," said Rudolf Ferscha, CEO of Eurex. "Eurex is committed to offering customers innovative products, and we are the first exchange to list credit derivative products. We believe that credit derivatives based on iTraxx indices will meet investor demand for liquidity and transparency in the credit markets and facilitate credit risk management at low cost".
David Mark, CEO of IIC, said, "The iTraxx indices have successfully established the market standard in credit derivative indices, demonstrating that liquidity increasingly goes where market players perceive independence and transparency. The next phase of product design for a futures contract will be crucial to ensure wide buy-in. We expect that, following the recent launch of funded notes on iTraxx indices, the coming credit derivative futures contract will attract new participants to this dynamically growing market, thus adding further depth and liquidity to the benefit of all."
iTraxx CDS indices are managed and administered by IIC and were launched in 2004 in conjunction with the leading global investment banks. They comprise the most liquid names in the European and Asian markets, and have become established as the leading CDS indices.
The iTraxx Europe index is an equally weighted portfolio of the 125 most liquid European investment grade credit default swap entities.