Markit's new mortgage derivative index, PrimeX, is scheduled to launch today.
According to Markit's Web site, the intent of the index is to create a ‘liquid, tradeable tool allowing investors to take positions on prime mortgage-backed securities via [credit default swap (CDS)] contracts. Its liquidity and standardization will allow investors to accurately gauge market sentiment around the asset class, and to take short or long positions accordingly.’
Four baskets of synthetic CDS with exposure to prime residential mortgage-backed securities collateral will begin trading today, according to a summary included in Amherst Securities' latest Mortgage Insight report, which described the introduction of the instruments as "very positiveâ�¦for a number of reasons."
According to Amherst, the instruments will fill a void by providing a vehicle for shorting prime AAA non-agency residential mortgage-backed securities. The PrimeX indices also offer advantages to investors who want to acquire a long position in prime credit, Amherst says, adding that the indices will assist in increasing the transparency in the prime market sector.