Hey everybody,I've been talkting about this issue to several people in the industry but no one seems to know anything specific. Last july Eurex announced that it has received the licence to introduce a futures contract referencing iTraxx Main maybe until end of 2005. I've heard about some problems in agreeing on the best setup for the instrument. (perfect hedge of cds contracts vs. easy to trade)Does anyone of you know more about this issue and a possible new timeframe?Thanks for your feedback,Sam

i read somewhere the delay is due to ISDA's investigation into the problems with settlement of CDS when they are more outstanding contracts than bonds. untill generally agreed procedure is developed, exchange trades futures are put on hold. decision of isda not expected before end of july. so maybe more clarity coming soon?

I heard the same thing... end of 2005. but there have been many delays before.I could imagine that there might be some problem with monitoring for defaults and how to settle them. I mean they probably don't really want to let IndexCo and CreditEx do the Recovery determination. And standard margining might not be sufficient as well. --> jumps are far more likely on credit than on equity since there might be surprising defaults like parmalat was.

There was another article about this in last weeks FT. I would be surprised if there were many participants planning to trade it as soon as the iTraxx Futures list. Does anyone have any other views about whether this will take off or can post the complete article?Eurex move to end murky CDS tradeBy Haig Simonian in Bürgenstock, Switzerland and Gillian Tett in LondonPublished: September 7 2006 21:38 | Last updated: September 7 2006 21:38The new head of Eurex said on Thursday that Europe’s largest derivatives exchange was preparing to list the world’s first futures contract on credit default swaps – a move that would take the $17,000bn industry out of the “over-the-counter” world into the regulated sphere, for the first time.Andreas Preuss, chief executive, declined to say when the contract, first mooted in 2005, would start. However he indicated that it was likely to emerge next year. Eurex plans to meet with dealer banks in London next week to enlist their support.continues....

This has been going on for years. The big advantage would be that increased competition from the exchanges would chip away at currently wide bid ask spreads. But this is also why the dealers are not so cool with the idea (they dont like the BUXL future either....bastards). The disadvantage is that defaults create a big freaking mess (i never had the patience to really read how they deal with it...it is just a mess, period). Also, the word "futures" is a misnomer...only the front contract would be trading (i.e. on the run itraxx), there would be no 2nd or 3rd (like with real futures) because no one knows the underlying portfolio of the next itraxx series beforehand. So in essence, the so called itraxx futures is just a listed itraxx contract, sufficiently standardized such that it can be traded electronically instead of OTC. If they wait any longer with this, the product is never going to come out, as pricing and liquidity provided by the dealers is already satisfactory and getting better and better as new dealers start making markets in itraxx contracts. This itraxx futures will probably fail just as bad as the buxl futures a couple of years ago.

QuoteOriginally posted by: Gmike2000 Also, the word "futures" is a misnomer...only the front contract would be trading (i.e. on the run itraxx), there would be no 2nd or 3rd (like with real futures) because no one knows the underlying portfolio of the next itraxx series beforehand. So in essence, the so called itraxx futures is just a listed itraxx contract, sufficiently standardized such that it can be traded electronically instead of OTC. Not necessarily a problem. I see S&P futures trading out to '08, with the composition of the index also unknown (although to a smaller degree).Future contracts would involve a lot less paperwork and backoffice load (incl. netting, assigning, margins etc.etc.) and less credit concerns. However, the performance of the BUXL contract doesn't bode too well for the Itraxx contract I fear.

Seems like CME is also planning some form of completely new default-linked future on single name. Anyone have any idea what format this is taking? Seems to me that if it remarkable different than a CDS contract, no one will trade it over an exchange.CHICAGO (Dow Jones)--The Chicago Mercantile Exchange is taking its firststeps to tap into the $26 trillion credit-derivatives market by seekingregulatory permission to list credit-event futures on three companies withless-than-stellar credit ratings.The largest U.S. futures exchange filed documents earlier this month with theCommodity Futures Trading Commission seeking regulatory approval to listcredit-event futures for Centex Corp. (CTX), Tribune Co. (TRB) and JonesApparel Group Inc. (JNY).The futures are five-year contracts that allow participants to hedge theirrisk against such events as bankruptcy, default, non-payment and debtrestructuring. All three companies have credit ratings near or below theinvestment grade/junk barrier.The Chicago Mercantile Exchange Holdings Inc. (CME) unit chose the companiesbased in part on their credit ratings and their level of activity, orliquidity, in five-year credit default swaps, said CME spokeswoman PamelaPlehn. She also said CME wanted to pick firms from different industries.Pricing for the new futures contracts will be based on the market'sexpectations that the listed companies might experience a credit event. Thebuyer of a credit swap receives credit protection, while the seller of the swapguarantees the credit worthiness of the product.Plehn said the exchange plans to eventually add other companies to itscredit-event product line. The exchange hopes to begin trading credit-eventfutures on its Globex electronic platform in the first quarter of 2007, shesaid.The outstanding notional value of the credit-derivatives market reached $26trillion by the middle of this year, according to the exchange. But to date,access to that market has only been offered via over-the-counter transactions,or deals that occur off the exchange.etc etc etc

Did this ever happen?y