Exchange traded funds on the Dow Jones CDX indices could hit the market in a year's time while listed futures are anticipated to take off in as little six-months. Lisa Watkinson, global product manager for CDS and credit indexation products at Morgan Stanley in New York, noted that following the creation of a single credit derivatives index focus is being turned to the next generation of products, such as ETFs and futures. The launch of ETFs would need approval of the Securities and Exchange Commission, which typically takes around nine months, although the products will likely follow closely from the hotly anticipated launch of futures, she said.
Watkinson also anticipates further divergence of credit markets from interest-rates, as credit derivatives may grow to more closely resemble the equity market. A larger universe of corporates is found in the equity market than in fixed-income and the eventual addition of credit derivatives referencing middle market corporates could add as much as USD10 trillion to volumes, she said.
