CMBX, the planned synthetic commercial mortgage-backed securities index, is expected to start trading by March 7.
Markit, which is administering the index, has released details of the rules on its Web site. "The one noticeable change the draft makes clear is that there will be five traded index tranches from the outset, rather than an initial introduction of just a single AAA tranche, as was previously reported," said Darrell Wheeler, a managing director at Citigroup.
Similar to the ABX index, which started trading in January, CMBX will reference AAA, AA, A, BBB and BBB minus rated bonds from 25 deals. All of the weightings will be equal and will be rolled over every six months, April 25 and Oct. 25. "The fact that the dealers have focused on five simple rating categories should make the index a fairly easy and efficient method to consider the various credit risk exposures," Wheeler said. "While the use of 25 deals could create some rollover volatility, we suspect that a sufficient number of transactions was selected to ensure that exposure to any one deal should not affect any traded tranche level, even at the BBB minus level."
