Markit To Launch Commercial Mortgage Total Return Swap Index

Markit, a financial information services company, has announced the forthcoming launch of the Markit TRX.NA index, which is designed to provide investors the opportunity to gain exposure to commercial mortgage-backed securities (CMBS) through total return swap (TRS) contracts.

The Markit TRX.NA index series will be based on a standardized basket of 118 CMBS reference obligations drawn from the Markit CMBX.NA.AAA index series.

Markit says the index will be the first total return index to use consensus pricing on the TRS. A TRS allows investors to benefit from a security's price appreciation or depreciation without having to purchase the security outright, the group adds.

The TRX.NA will allow investors to isolate the movement of CMBS prices, in contrast to the synthetic Markit CMBX contracts that are exposed primarily to the default risk of the reference obligations.

"The TRX index builds on the success of the CMBX to offer the market a total return index based on independently verified and consensus-driven pricing," says Kevin Gould, president of Markit North America and head of the group's structured finance unit.

The index will be tradable from inception, with market participants on both the buy- and sell-side expected to participate. All swap contracts will have standardized documentation, and the Depository Trust and Clearing Corp. (DTCC) will offer trade confirmation and settlement, Markit says.

Markit will provide third-party oversight and consensus pricing for use in trade settlement. Valuation analytics to calculate price, duration and spread sensitivity for Markit TRX.NA contracts will be published on Markit's Web site,

SOURCE: Markit


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