LCDX to start trading on Tuesday

By Sara Rosenberg

New York, May 17 - LCDX, a tradable index with 100 equally weighted underlying single-name loan-only credit default swaps, will begin trading on Tuesday, according to an informed source.

The index is being launched by CDS IndexCo, a consortium of dealer banks active in the loan and credit default swap markets, and Markit.

Thirteen banks will be making markets at launch - Bank of America, Barclays Capital, Bear Stearns, BNP Paribas, Citigroup, Credit Suisse, Deutsche Bank, Goldman Sachs, JPMorgan, Lehman Brothers, Merrill Lynch, Morgan Stanley and UBS.

The index will consist of 100 reference entities, referencing first-lien loans listed on the Markit Syndicated Secured List.

If an entity previously was on the Syndicated Secured List and was included in any given series of LCDX, but is removed due to pay down of its syndicated secured loans (without being replaced by new syndicated secured loans), the entity's weighting in the index will be set to zero, and the index going forward from that point will trade with a factor.

Applicable credit events for the product will be failure to pay and bankruptcy.

It is expected that any credit events will be settled via a credit event auction similar to those used for unsecured CDS, with some customization for loan CDS.

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