Eurex, the international derivatives exchange, will start trading in credit index futures on 27 March with three contracts. In addition to the already announced future based on the iTraxxÂ® Europe 5 year, Eurex will offer futures contracts on the iTraxxÂ® HiVol 5 year and iTraxxÂ® Crossover 5 year indices. The iTraxxÂ® Europe index is an equally weighted portfolio of the 125 most liquid European investment grade credit default swap (CDS) entities. The iTraxxÂ® HiVol index is an equally weighted portfolio of the 30 entities with the highest spread from the iTraxxÂ® Europe index. The iTraxxÂ® Crossover index is an equally weighted portfolio of 45 European sub-investment grade entities.
Eurex CEO Andreas Preuss said at the 32nd annual Futures Industry Conference in Boca Raton, Florida, U.S.A.: âThe launch of credit derivatives is an important element of our product initiative. We have observed strong interest in the market for all three credit futures. With our Eurex iTraxxÂ® futures suite customers can manage their credit risk at lowest cost with all the advantages an exchange-traded product offers.â
All three underlying indices are provided by International Index Company Ltd. (IIC). The contracts will have a fixed coupon and semi annual maturity dates in March and September. The Eurex iTraxxÂ® credit futures will closely mimic the risk structure of credit default swaps traded in the over-the-counter (OTC) market. Trading on Eurex will involve Eurex Clearing as central counterparty thereby reducing the counterparty and systemic risk and adding to the benefits the product will offer to users.