Reply #60: Eurex to launch credit default swap trading

[54anickel]

http://news.ft.com/cms/s/d6814e2e-f23a-11d9-8e69-00000e2511c8.html

Eurex, the world’s largest derivatives exchange, on Monday said it would launch the first exchange-traded credit default swap instrument this year, signalling the coming of age of a rapidly developing market.

Eurex said it had signed an exclusive agreement with International Index Company to license its European iTraxx indices, which are based on 125 CDS contracts – instruments that allow investors to take protection against default by a specific borrower.

The announcement attests to feverish development in the CDS market, given that the iTraxx indices themselves were launched only last year.

“An exchange-traded contract is widely considered to be a major step in the shaping of the global credit derivatives market,” the parties said in a statement.

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CDS contracts have risen to prominence recently, a trend that has been highlighted by dramatic credit events, such as the downgrade of US carmakers GM and Ford from investment grade to junk. Currently, CDS contracts are traded exclusively over-the-counter (OTC) between two parties.

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