Citi contemplating US credit derivatives index

Citigroup is contemplating launching a US credit derivatives index product, according to Doug Warren, managing director for North American credit derivatives, and intends to make a decision on this within the next two to three weeks.

The index will be aimed at 'real money' investors such as insurance companies and pension funds, according to Warren, but he declined to provide more details. Citi's initiative follows a raft of credit derivatives indexes released in past few months by firms such as Lehman Brothers and CSFB.

Lee McGinty, head of credit derivatives index research at JP Morgan Chase in London, said the majority of these products have been driven by banks' internal research and analytic needs. But the Citigroup product appears to be a direct competitor to JP Morgan Chase/Morgan Stanley's trac-x index that was released in Europe last month, but is yet to debut in the US. However, McGinty is unconcerned: "The chance of anyone joining in and trading Citi's index is very low, as there are other products with far more liquidity and transparency," he said.

JP Morgan Chase and Morgan Stanley are launching a funded version of their European trac-x index next week, as well as other modified products. McGinty declined to provide additional details, but JP Morgan Chase has previously said it would bring out a tranched version of the trac-x index in July. JP Morgan Chase and Morgan Stanley are planning to launch a US version of trac-x on July 25.