Traders and analysts expect the creation this fall of a loan-only credit-default swap index to boost volume and liquidity in single-name LCDS trading.
Estimates of market volumes since the launch of an International Swaps and Derivatives Association template in June vary widely, but Lisa Watkinson, global head of collateralized debt obligation business development at Lehman Brothers in New York, puts the U.S. market at USD6 billion.
The degree to which the LCDX will boost single-name volumes in the near term will depend on factors surrounding the timing, volatility and style of the index, traders said. The average estimate was about 30-40% increase by year-end, but traders called any estimate a crapshoot. Traders pointed to high-yield credit-default swaps, where single-name trading volumes were about USD10 billion before the launch of indices and now trade in the hundreds of billions.
