TABX Enables Investors to Gain or Hedge a Specifically Tranched Exposure to ABX.HE, a Synthetic ABS Index Referencing U.S. Sub-Prime Residential Mortgages
NEW YORK -- CDS IndexCo LLC ("CDS IndexCo"), a consortium of 16 investment banks licensed as market makers in the ABX, CDX and CMBX indices, and Markit Group Limited ("Markit"), the leading provider of independent data, portfolio valuations and OTC derivatives trade processing, announced today the launch of TABX, standardized tranches of the ABX indices, the synthetic asset backed benchmark indices referencing U.S. sub-prime residential mortgages.
TABX will provide investors with a universe of tradable instruments that will open up a range of new trading strategies to suit individual risk appetites. For the first time, investors will be able to hedge or gain leveraged exposure to the BBB and BBB- tranches of the ABX indices through a transparent, multi-dealer product.
Brad Levy, Managing Director, Firmwide eBusiness Group at Goldman Sachs and acting Chairman of CDS IndexCo, said: "The launch of TABX gives investors another way to gain or hedge exposure to specific types of ABS risk. TABX now allows the market to target a precise risk profile within the ABS portfolio and express a view by going long or short, much like the CDX and iTraxx tranches."
"TABX was designed to provide clients with synthetic, leveraged exposure to the ABS markets. These standardized ABX tranches offer greater operational efficiency than bespoke tranches, and will have the dual benefit of increasing liquidity and transparency in the synthetic ABS marketplace, particularly in terms of the valuation of these bespoke instruments. This is an exciting new product, and we will continue to see innovation in CDS of ABS over the coming months," stated Kevin Gould, Executive Vice President and Head of Data Products and Analytics at Markit.
TABX will reference the underlying names of the ABX BBB and BBB- sub-indices. Both sets of tranches will consist of the same 40 reference entities which constitute the current ABX 07-1 and the previous ABX 06-2 index vintages; the 40 ABX BBB reference obligations underlie the six BBB Tranche Indices while the ABX BBB- underlie the six BBB- Tranche Indices.
Attachment points for the TABX.HE BBB tranches will be 0, 3, 7, 12, 20, 35 and 100%. The BBB- tranches will have attachment points at 0, 5, 10, 15, 25, 40 and 100%. Much like the iTraxx and CDX indices, ABX tranches will trade at fixed coupons. They will be quoted on price and will roll every six months, two weeks after each ABX roll.
