Markit Group, a provider of independent data, portfolio valuations and OTC derivatives trade processing, has acquired International Index Company and has agreed to acquire CDS IndexCo in a
Markit Group, a provider of independent data, portfolio valuations and OTC derivatives trade processing, has acquired International Index Company and has agreed to acquire CDS IndexCo in a transaction it expects to complete by the end of the year, bringing two series of widely-used credit derivative indices under common ownership.
IIC owns the iTraxx Europe and iTraxx Asia credit derivative indices as well as the global family of iBoxx bond indices. CDS IndexCo owns the CDX credit derivative indices and the synthetic structured finance and loan indices ABX.HE, CMBX and LCDX. Both businesses are currently owned by overlapping consortiums of international banks.
The iTraxx and CDX credit derivative index families, created by the merger of dealer-owned indices in 2004, are credited with revolutionising the credit derivative markets. They have increased the transparency and liquidity of these markets, and provide investors with an efficient, rules-based tool to gain or hedge exposure to the underlying credit markets.
The iBoxx bond index family was the first comprehensive suite of independent, transparent, multiple-contributor priced bond indices when it was launched in 2001.
‘The acquisition of IIC and CDS IndexCo will put us at the very heart of the global credit and rates markets,’ says Markit chief executive Lance Uggla. ‘By bringing the indices together, we will create the next generation of credit benchmarks and stimulate innovation in trading across the entire fixed income market.’
IIC is currently owned by ABN Amro, Barclays Capital, BNP Paribas, Deutsche Bank, Deutsche Börse, Dresdner Kleinwort, Goldman Sachs, HSBC, JPMorgan, Morgan Stanley and UBS.
CDS IndexCo is owned by a consortium of 16 investment banks licensed as market-makers in the ABX, CDX, CMBX and LCDX indices, comprising ABN Amro, Bank of America, Barclays Capital, Bear Stearns, BNP Paribas, Citi, Credit Suisse, Deutsche Bank, Goldman Sachs, HSBC, JPMorgan, Lehman Brothers, Merrill Lynch, Morgan Stanley, UBS and Wachovia.
‘The development of best of breed indices has been the crucial cornerstone to the explosive growth in index trading,’ says Fergus Lynch, managing director and global head of index development at Deutsche Bank and chairman of IIC. ‘Combining these foundations with Markit’s development capabilities will enable index trading to reach even greater heights.’
Brad Levy, a managing director at Goldman Sachs and acting chairman of CDS IndexCo, says: ‘The company has worked with Markit for the past three years in many capacities. They possess the infrastructure to manage the indices efficiently, and their knowledge of the market and products is unparalleled. Markit is well prepared and positioned to take on full ownership of the indices, and I’m confident that it will continue to be an engine of innovation for the industry going forward.’
The official names of the indices will remain unchanged but will be known as Markit indices, hence the IIC indices will be called Markit iTraxx and Markit iBoxx, while the CDS IndexCo indices will be known as Markit ABX.HE, Markit CDX and Markit LCDX once the acquisition has been completed.
Markit’s new index division will be headed by Stephan Flagel. who joined Markit in June from Barclays Capital, where he was chief operating officer for global research. Flagel will report to Niall Cameron, a member of Markit’s management team and head of equities and indices.
Markit Group provides data, portfolio valuations and derivatives trade processing to the global financial and commodities markets. It receives daily data from 90 dealing firms and its services are used by almost 1,000 institutions.