Despite its many advantages, the newly-launched index on asset-backed securities so far has limited usefulness for trading single names. ABX, which currently includes only 20 names, has added little transparency or liquidity to the names it includes, panelists said. "I don't know where any one of those 20 names trades day today," said one panelist. "It's good to take a view on the sector as a whole, but it's worthless for trading individual names."
Advantages of the index include the ability to ramp quickly, hedge portfolios, buy names not available in the cash market and take a negative view on the sector--a tool previously available only in corporate indices. Transparency in individual names is expected to improve as the index trades become more and more liquid.
