An estimated USD40billion in notional was traded on the iTraxx credit-default swap indices when they rolled last month, said dealers at last week's Strategic Legal, Regulatory And Business Guide To Credit Derivatives And CDOs conference in London. The figure is double the USD20 billion reported after the June roll and does not include options or tranche trades, both markets which boomed in the third quarter. One trader said he thought this was a conservative estimate.
Richard Stuart-Reckling, product manager for CDS and indices at Morgan Stanley in London, said more hedge funds and real money accounts are relying on the synthetic indices to take views. "The investor base is far deeper and broader than three months ago," he said. Daniel Berman, v.p. in credit derivatives at JPMorgan agreed, adding the instruments are particularly attractive to hedge funds.
Dealers also estimated up to USD1 billion is traded on the indices every week, but volumes pick up closer to the roll as funds unwind shorts and investors take new positions on the reworked portfolio. No formal figures are gathered on iTraxx trades, but Stuart-Reckling said he would welcome data gathering by a third party. He noted all 27 iTraxx dealers would have to agree to report volumes for figures to be of real value.