The launch of the U.S. LCDX loan credit-default swap index in the first quarter of next year has been a priority for the trade association's credit derivatives group. Kimberly Summe, general counsel in New York, said, "It's not an exaggeration to say that there have been hundreds of calls and emails on this area." She explained ISDA has gathered together loan and derivative officials as well as lawyers in almost weekly meetings to put together documentation for contracts on the index. Summe expects the bulk of the work to be completed in February. Markit Group will be administering the index, which has a launch date scheduled for March 20.
The discussions have focused on two areas: settlement and whether to amend single-name loan credit-default swap documentation. The group has decided to use the auction format it has trialed for settlement of credit-default swaps on unsecured debt for loans as well. It has not yet decided whether to go back and alter documentation for single-name loan credit-default swaps. Summe said the forms will likely migrate toward cash settlement, the question is when. "We will pick that up again in January," she added.
