Markit and Creditex, in partnership with 14 credit derivative dealers, have conducted a credit event auction to facilitate the settlement of credit derivative trades referencing Lehman Bro
Markit and Creditex, in partnership with 14 credit derivative dealers, have conducted a credit event auction to facilitate the settlement of credit derivative trades referencing Lehman Brothers Holdings, which filed for Chapter 11 bankruptcy protection on September 15.
The auction was conducted in accordance with the International Swaps and Derivatives Association’s 2008 Lehman CDS Protocol. Markit and Creditex are the official administrators of credit event auctions. At 2:00 p.m. EST on Friday, the final price for Lehman Brothers bonds was determined as 8.625 per cent.
The credit event auction enabled market participants to cash settle triggered contracts including single name, index, bespoke tranche and other credit derivative transactions. During the auction, dealers submitted orders electronically on the Creditex platform and the auction submissions were delivered electronically to Markit, which calculated and verified the results.
On October 23, Markit and Creditex will conduct a credit event auction to facilitate the settlement of CDS contracts referencing Washington Mutual.
The credit event auction process was launched in 2005 by Markit and Creditex in collaboration with the ISDA and major credit derivative dealers to facilitate the settlement of credit derivative contracts in the event of a corporate default.
Auctions have been held to facilitate settlement of credit derivative trades referencing Federal National Mortgage Association, Federal Home Loan Mortgage Corporation, Tembec Industries, Quebecor World, Movie Gallery, Collins & Aikman, Delta Air Lines, Northwest Airlines, Delphi Corporation, Calpine Corporation, Dana Corporation and Dura.
Markit has more than 1,000 employees in Europe, North America and the Asia-Pacific region and provides services to more than 1,000 financial institutions.
Creditex, a wholly-owned subsidiary of IntercontinentalExchange, specialises in the execution and processing of credit derivatives, operating a hybrid model of voice and electronic execution, and was the first to launch electronic trading for credit default swaps in 2004. The firm’s operating subsidiaries T-Zero and Q-Wixx provide additional electronic processing and execution services for CDSs.
