The battle between two nascent indices of credit-default swaps is heating up in Japan as rivals race to sign up additional market makers to increase trading volumes. But this time it is not iBoxx, but the CJ50 that is taking on TRAC-X (DW, 11/3). With both indices having roughly equal trading volumes and partners the decisions of Nikko Citigroup and Merrill Lynch are likely to swing the balance. An official at Nikko said it will come to a decision early next year, while dealers at Merrill declined comment.
"There seems to be index wars happening globally," remarked an official at JPMorgan. "The Japanese market is too small to have two indices. TRAC-X Japan is a rules-based index with no subjectivity and is part of a large global family--we think this gives us the advantage," said Robert Breden, head of Asian investment grade trading and structuring at Morgan Stanley in Tokyo.
"We are in favor of a solution whereby the market will agree upon one index. Two similar products may confuse clients and is not good for liquidity," said Stephane Delacote, head of credit derivatives at BNP Paribas in Tokyo. BNP, along with Goldman Sachs and Bank of Tokyo-Mitsubishi launched the CJ50 index earlier this year (DW, 8/24) while JPMorgan and Morgan Stanley set up a Japanese component for its TRAC-X family of indices. Both products are comprised of 50 default swaps.
