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The Ghosts Constituents Of Crossover

20 April 2015 by lberuti

iTraxx Crossover Series 22 was launched in October 2014. It has been traded for a bit more than 6 months. When it was decided to expand the number of its constituents to 75 compared with the previous series 60, the idea was to bring liquidity to CDS referencing companies dealers were less (or not at all) used to trading. It was supposed to help kick start the European CDS High Yield market. The experiment was anything but a success when the composition of series 23 was decided, as all of the new entrants were still trading by appointment only. Nevertheless, the list was left intact, and all were included in iTraxx Crossover series 23. The situation is not getting any better, and some of the riskier entities (like PPCGA, the Greek utility) have actually stopped trading. You can stare at the above grapple as long as you want, you will not find PPCGA, LOXAM, CAREUK, ISOLUX, HEMA or DRYMIX. They have simply gone off traders’ radar screen. The liquidity of the iTraxx Crossover index has not been impacted yet, but, in any move (and we have seen that recently), its basis (ie the difference between an index quoted level and its theoretical level) will be all over the place.