CBOT confirms talks to list Trac-x futures

The Chicago Board of Trade (CBOT) confirmed it is in talks with Dow Jones Indexes to list futures contracts on the Trac-x family of credit default swaps (CDS) indexes.

“The CBOT is actively pursuing a licence to list Trac-x futures with Dow Jones,” said a spokeswoman for the Chicago-based exchange.

Dow Jones Indexes is currently finalising its licence agreement with the Singapore Exchange (SGX) to list Trac-x futures and officials at the index company said they are also talking one exchange in Europe. The Dow Jones officials declined to comment on which exchange they are negotiating with, but Frankfurt-based Eurex is widely tipped as Dow Jones’s counterpart.

While negotiations are near completion, any licence agreement announcement will have to wait for the outcome of merger talks between Trac-x and rival iBoxx. “There are quite a few things in place we could announce, but we are not doing it to avoid hurting any potential consolidation,” said Lars Hamich, executive director for global business development at Dow Jones Indexes in Frankfurt.

Market participants say exchange-traded futures contracts will further boost liquidity on CDS indexes, attracting new participants to a market that will have greater transparency and visibility.

In addition to SGX, Eurex and CBOT, the Tokyo International Financial Futures Exchange (Tiffe), will also likely list CDS index futures soon. Indeed, Tiffe and CBOT earlier this month signed an agreement to co-operate and share information regarding new product research and listings.

The Trac-x family of indexes was launched by Morgan Stanley and JP Morgan Chase in April 2003. In October, a group of market-makers dissatisfied with the way Trac-x was handled, led by Deutsche Bank, ABN Amro and Citigroup, created their own independent index, iBoxx. As a response to market reproaches and in order to bring more independence to Trac-x, Morgan Stanley and JP Morgan Chase ceded management of the index to Dow Jones Indexes at the end of last year.