Eurex to launch CDS index product

Eurex has licensed International Index Company's European iTraxx indexes in preparation for the launch of an exchange-traded contract based on the European credit default swap (CDS) index before the end of the year.

Eurex signed the exclusive licensing agreement today, which covers the European iTraxx indexes launched by IIC last year. The Europe CDS index is based on a weighted portfolio of the 125 most liquid investment-grade European CDS.

Eurex said that the launch of an exchange-traded CDS derivatives product would be "a major step in the shaping of the global credit derivatives market."

Rudolf Ferscha, chief executive of Eurex, said: "We are the first exchange to list credit derivatives 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, chief executive of IIC, added: "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 indexes, the coming credit derivatives futures contract will attract new participants to this dynamically growing market, thus adding further depth and liquidity."

IIC also collaborates with Dow Jones to produce Asian, Australian and Japanese CDS indexes.