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iTraxx

The iTraxx indices are a family of tradable credit default swap (CDS) indices that serve as benchmarks for credit risk in European, Asian, and emerging markets, enabling investors to hedge exposures, speculate on credit quality, and achieve efficient trading in the CDS market.^[1] Launched in 2004 through the merger of the Trac-x and iBoxx credit derivative indices, iTraxx was developed to enhance liquidity, transparency, and standardization in the European and Asian CDS sectors, with Markit (now part of S&P Global) serving as the administrator and calculation agent since its acquisition in November 2007.^[2] The flagship iTraxx Europe index comprises 125 equally weighted investment-grade entities from liquid European corporate and sovereign issuers, while the iTraxx Crossover focuses on 75 high-yield (sub-investment grade) names to capture broader credit risk.^[3] Complementing these are Asia-Pacific variants, including iTraxx Japan (40 investment-grade names in Japanese yen), iTraxx Asia ex-Japan (40 investment-grade entities in U.S. dollars), and iTraxx Australia (25 names in U.S. dollars), alongside the emerging markets-oriented iTraxx CEEMEA (25 entities from Central and Eastern Europe, Middle East, and Africa).^[1] Indices roll semi-annually in March and September based on liquidity polls, with standard maturities of 3, 5, 7, and 10 years for Europe (5 years for Asia-Pacific), ensuring they reflect the most actively traded single-name CDS contracts.^[1] iTraxx indices are widely used by banks, asset managers, hedge funds, and other institutional investors for portfolio diversification, relative value trades, and as underlying assets for structured products like total return swaps and excess return indices, which track performance including funding costs and are published daily.^[4] Their rules-based construction prioritizes the most liquid constituents, promoting market efficiency and data integrity, while sub-indices such as iTraxx HiVol (30 high-volatility names) allow targeted exposure to specific risk segments.^[2] Since inception, iTraxx has become a cornerstone of the global credit derivatives ecosystem, with European Commission commitments in 2016 ensuring fair, reasonable, and non-discriminatory licensing to support broad market access.^[1]

Introduction

Definition and Purpose

The iTraxx indices constitute a rules-based family of tradable credit default swap (CDS) indices that track the performance of the most liquid CDS contracts on corporate and sovereign reference entities across specified regions.^[1] These indices aggregate equally weighted single-name CDS contracts, providing a standardized measure of credit risk in investment-grade (IG) and high-yield (HY) segments.^[1] At their core, a CDS is a derivative contract where the buyer pays a periodic premium to the seller in exchange for compensation if a credit event, such as default, occurs on a reference entity like a corporation or sovereign issuer.^[5] The primary purpose of iTraxx is to serve as a benchmark for regional credit markets, enabling investors to gain efficient exposure to credit derivatives, hedge against default risks, speculate on credit spreads, and manage portfolio credit exposures through bullish or bearish positions.^[1] By focusing on highly liquid contracts, iTraxx facilitates transparent pricing and trading in over-the-counter credit markets.^[1] iTraxx covers Europe with indices for IG (e.g., the flagship iTraxx Europe Main tracking 125 entities) and HY credits, as well as Asia (including Japan with 50 entities, non-Japan Asia with 40 entities, and Australia with 25 entities) and emerging markets (such as the iTraxx CEEMEA index with 25 entities from Central and Eastern Europe, the Middle East, and Africa).^[1] This regional emphasis ensures representation of liquid, market-relevant credits, supporting standardized risk assessment and liquidity in global credit derivatives trading.^[1]

Ownership and Administration

The iTraxx indices are currently administered by S&P Dow Jones Indices (S&P DJI), a division of S&P Global, following the completion of S&P Global's acquisition of IHS Markit on February 28, 2022.^[6] This merger integrated IHS Markit's index businesses, including iTraxx, into S&P DJI's portfolio, enhancing its offerings in credit default swap benchmarks.^[1] S&P DJI is responsible for the calculation, publication, and periodic rule updates of the iTraxx indices, utilizing a rules-based methodology to ensure liquidity and replicability.^[1] Governance involves advisory panels, such as those for iTraxx Europe and Asia ex-Japan, which incorporate input from market participants including dealers to oversee index maintenance and updates, in line with revised terms of reference established after 2016 European Union regulatory commitments.^[1] The indices are licensed to market participants on fair, reasonable, and non-discriminatory (FRAND) terms, as mandated by the 2016 EU commitments in Case COMP/AT.39745, enabling the creation of exchange-traded products and other derivatives.^[7] Real-time and hourly total return pricing data are provided through S&P Global's platforms, sourced from multiple contributing banks with implemented quality controls to maintain accuracy.^[1] iTraxx adheres to the International Organization of Securities Commissions (IOSCO) Principles for Financial Benchmarks, with S&P DJI undergoing annual independent reviews to confirm compliance, including measures for transparency, oversight, and prevention of manipulation as of 2025.^[8] Additionally, ongoing monitoring by FTI Consulting ensures fulfillment of the 2016 EU commitments for benchmark integrity.^[1]

History

Formation and Launch

The iTraxx indices emerged from the need to standardize benchmarking in the rapidly expanding credit default swap (CDS) market, which had grown significantly since 2002 due to increasing use of credit derivatives for hedging and speculation. Prior to iTraxx, two competing index families dominated: Trac-X, launched in 2003 by J.P. Morgan and Morgan Stanley as a merger of their earlier synthetic CDS indices like JECI, HYDI, and TRACERS, focusing primarily on U.S. names; and the iBoxx CDS indices, introduced around the same time by a consortium of European banks including ABN AMRO, Barclays Capital, BNP Paribas, Deutsche Bank, Dresdner Kleinwort Wasserstein, Morgan Stanley, and UBS Warburg, targeting non-U.S. markets to address fragmentation in the over-the-counter (OTC) CDS space.^[9]^[10]^[11] In April 2004, the banks behind Trac-X and iBoxx signed a letter of intent to merge their offerings, culminating in the formal completion of the merger on June 21, 2004, to create unified CDS index families: CDX for North America and iTraxx for Europe and Asia. This consolidation was managed by the newly formed International Index Company (IIC), a joint venture among major investment banks including Deutsche Bank, J.P. Morgan, and others, aimed at establishing a single, liquid benchmark to reduce market fragmentation and enhance transparency in European and Asian credit derivatives trading. The iTraxx family was initially focused on investment-grade credits, with the flagship iTraxx Europe Main index comprising 125 equally weighted, single-name CDS contracts from liquid European issuers across sectors like financials, industrials, and utilities.^[10]^[12]^[13]^[9] Following the merger, iTraxx indices were launched in summer 2004, with the first series rolling out to provide standardized, tradable benchmarks for the OTC CDS market. Early adoption was swift, as the indices quickly gained liquidity amid the post-2002 surge in credit derivatives activity, with iTraxx Europe Main establishing itself as a core reference for pricing and hedging European corporate credit risk by late 2004, supported by notional outstanding volumes that reflected broad dealer participation.^[12]^[9]^[14]

Key Developments and Acquisitions

In 2005, shortly after its initial launch, the iTraxx index family expanded to include the iTraxx Japan index, targeting investment-grade Japanese corporate credit default swaps, and the iTraxx Crossover index, which focused on high-yield European sub-investment-grade entities to provide broader coverage of riskier credits.^[15]^[16] These additions enhanced the indices' utility for hedging and speculation in regional markets, with the Crossover index comprising 75 equally weighted names selected based on liquidity and trading activity.^[17] By 2007, further geographic expansion occurred with the introduction of the iTraxx Asia ex-Japan index, incorporating 40 liquid investment-grade credits from Asian entities excluding Japan, thereby extending iTraxx's reach into high-growth emerging Asian economies.^[18] In November of that year, Markit Group acquired full ownership of the International Index Company (IIC), the entity controlling iTraxx, from its founding banks, and simultaneously completed the purchase of CDS IndexCo, owner of the U.S.-based CDX indices.^[19]^[20] This consolidation under Markit enabled standardized global administration, pricing, and data dissemination for both iTraxx and CDX, fostering interoperability and reducing fragmentation in the international credit derivatives market.^[21] The 2008 global financial crisis marked a pivotal surge in iTraxx trading activity, as investors sought protection amid widening credit spreads; for instance, the iTraxx Europe main index spread peaked at over 200 basis points in late 2008, reflecting heightened demand for credit default swaps as a hedge against corporate defaults. Notional outstanding in credit default swaps globally rose from $43 trillion in mid-2007 to a peak of over $60 trillion by end-2007, before declining to approximately $36 trillion by end-2008 due to portfolio compression.^[22] In response to the crisis, regulatory reforms reshaped iTraxx usage: the U.S. Dodd-Frank Act of 2010 mandated central clearing for standardized CDS indices, including iTraxx, to mitigate systemic risk, with the Commodity Futures Trading Commission determining iTraxx Europe and Crossover indices eligible for clearing by 2013.^[23] Similarly, the European Market Infrastructure Regulation (EMIR) in 2012 imposed clearing obligations for OTC derivatives like iTraxx CDS in the EU, promoting transparency and reducing counterparty exposure through designated central counterparties.^[24] In 2012, the iTraxx CEEMEA index was launched, comprising 25 equally weighted corporate and quasi-sovereign entities from Central and Eastern Europe, the Middle East, and Africa.^[25] In 2013, Intercontinental Exchange (ICE) launched futures contracts on iTraxx indices, including iTraxx Europe and Crossover, enabling exchange-traded access and further integrating iTraxx into cleared markets to comply with post-crisis regulations.^[26] More recently, in February 2022, S&P Global completed its $44 billion acquisition of IHS Markit, the parent of Markit and thus administrator of iTraxx, creating a unified platform for index governance and data services across fixed income and derivatives.^[27] In March 2020, the iTraxx MSCI ESG Screened Europe series was launched in collaboration with MSCI, incorporating ESG screening to exclude entities failing environmental, social, and governance criteria, with ongoing methodology updates refining liquidity thresholds.^[28]^[3] These developments reflect iTraxx's adaptation to sustainable investing trends and post-pandemic liquidity demands.^[29]

Index Families

European Indices

The iTraxx European Indices family encompasses a series of benchmarks that track credit default swaps (CDS) on corporate and financial entities domiciled in Europe, providing investors with exposure to investment-grade and high-yield credit risk across the region. These indices are constructed to reflect liquid segments of the European credit derivatives market, emphasizing corporate issuers while excluding sovereign debt. The primary indices are equally weighted to ensure balanced representation, with compositions determined semi-annually based on liquidity rankings derived from DTCC weekly trading reports on notional market risk activity.^[3] The flagship iTraxx Europe Main index consists of 125 investment-grade CDS referencing blue-chip European corporates from diverse sectors such as automotive, telecommunications, energy, and industrials, with a standard 5-year maturity. Eligible entities must maintain at least €100 million in publicly traded debt securities and hail from EU member states, EFTA countries, or the United Kingdom, ensuring a focus on highly liquid names that capture broad market dynamics in Western Europe. This index serves as a core benchmark for investment-grade credit, highlighting stable, large-cap issuers like major automakers and telecom operators.^[3]^[30] Complementing the Main index, the iTraxx Crossover comprises up to 75 CDS on high-yield and sub-investment-grade European firms, targeting riskier credits outside the investment-grade spectrum while adhering to similar liquidity and domicile criteria. With tenors including 5 years, it captures the performance of speculative-grade corporates, often from sectors facing higher default risks, and excludes most financials except specialty finance entities to maintain a corporate emphasis. This index is particularly useful for gauging sentiment in the lower-rated segment of the European credit market.^[3] Sector-specific variants within the European family address niche exposures, such as the iTraxx HiVol index, which selects the 30 most volatile investment-grade names from the Europe Main universe, primarily non-financial entities with the widest 5-year CDS spreads to highlight heightened credit risk dynamics. The iTraxx Senior Financials index tracks 30 investment-grade CDS on senior debt from European financial institutions, focusing on banks and insurers with strong capital structures, while the iTraxx Sub Financials counterpart covers 30 subordinated debt references from the same sector, offering insights into tiered financial credit hierarchies. These sub-indices, also equally weighted and liquidity-driven, enable targeted analysis of volatility and financial sector vulnerabilities without overlapping the broader corporate focus.^[3]^[31]

Asian and Emerging Market Indices

The iTraxx Asian Indices provide benchmarks for credit default swaps (CDS) on investment-grade corporate entities in Asia-Pacific markets, while the Emerging Market Indices cover corporate, quasi-sovereign, and sovereign risks in developing regions. These indices feature fewer constituents than their European counterparts to reflect localized liquidity constraints, with semi-annual rebalancing to maintain relevance amid evolving liquidity. Asian indices focus on corporate issuers, whereas emerging market variants incorporate quasi-sovereign and sovereign exposures to address regional debt characteristics.^[1] The iTraxx Japan Index consists of 50 equally weighted investment-grade CDS on liquid Japanese corporate entities, denominated in Japanese yen and selected through liquidity assessments in the single-name CDS market. It serves as the benchmark for Japan's corporate credit derivatives, capturing spreads across diverse industries within the country's developed economy. The index rolls every six months, with the on-the-run series typically maturing in five years to align with standard CDS tenors.^[1] The iTraxx Asia ex-Japan Index tracks 40 investment-grade CDS names from Asia-Pacific markets excluding Japan, denominated in U.S. dollars and including entities domiciled in or issuing from countries such as Hong Kong, Singapore, South Korea, and India. This index incorporates both regional corporates and multinational issuers with significant Asia-Pacific operations, providing a diversified view of non-Japanese Asian credit risk. Composed based on trading volume and dealer input, it highlights the region's growing integration in global credit markets while navigating liquidity variations across sub-regions.^[1] The iTraxx Australia Index focuses on 25 liquid investment-grade Australian entities, denominated in U.S. dollars and offering a specialized measure of domestic credit conditions in a resource-driven economy. Selected from the most actively traded CDS, it reflects Australia's emphasis on sectors such as financial services and resources, with constituents drawn from entities with substantial local issuance or trading activity.^[1] Emerging market coverage within the iTraxx family includes the iTraxx CEEMEA Index, which comprises 25 equally weighted corporate and quasi-sovereign CDS from Central and Eastern Europe, the Middle East, and Africa, emphasizing higher-yield opportunities in developing regions. Additionally, the iTraxx SovX Latin America Index benchmarks sovereign CDS from Latin American countries, featuring 8 names to capture key emerging sovereign risks.^[2] These indices often yield higher spreads than Asian corporate benchmarks due to elevated credit and geopolitical factors, and they uniquely incorporate sovereign and quasi-sovereign names to address the prevalence of government-linked debt in emerging economies.^[1] Across these indices, constituent sizes remain smaller—ranging from 8 to 50 names—compared to European indices, a direct adaptation to regional liquidity levels that limits the pool of viable, tradable credits. Standard maturities are five years, with series updates every March and September to incorporate fresh liquidity data and ensure the indices remain representative of active market segments.^[1]

Methodology

Composition and Selection

The iTraxx indices are composed of liquid single-name credit default swap (CDS) contracts referencing non-sovereign corporate entities, selected through a rules-based methodology administered by S&P Dow Jones Indices Limited (following the 2024 rebranding of IHS Markit Benchmark Administration Limited).^[3]^[32] Eligibility criteria emphasize liquidity and credit quality: entities must have outstanding publicly traded debt of at least €100 million for European indices or USD 150 million for iTraxx Asia ex-Japan (requirements vary by index) with maturities not exceeding 30 years, and demonstrate trading activity with notional traded greater than zero over the preceding eight weeks (for most indices) or six months (for iTraxx Japan), as reported by the Depository Trust & Clearing Corporation (DTCC).^[3]^[33] For investment-grade indices like iTraxx Europe and iTraxx Asia ex-Japan, entities require a minimum BBB-/Baa3 rating from major agencies (S&P, Moody's, Fitch), while non-investment-grade variants such as iTraxx Crossover target lower-rated or unrated names with spreads at least 1.5 times those of comparable investment-grade peers.^[3]^[34] Exclusions apply to distressed credits following credit events, sovereigns (unless specified for sub-indices), financial hybrids, and entities subject to sanctions or external events that impair tradability. As of June 2025, updated rules exclude corporate hybrid bonds from the iTraxx Crossover Supplementary List.^[33]^[34]^[3] Constituent selection follows a transparent, liquidity-driven process informed by market data and participant input. The International Index Company compiles a Liquidity List from the DTCC's six-month analysis of single-name CDS trading, ranking entities by total notional traded, number of trades, and alphabetical order for ties; this list forms the primary input for index composition.^[3]^[33] Dealer polls among major market makers supplement this data, particularly for resolving ambiguities in liquidity rankings or reference obligations, ensuring the top-ranked liquid names are included while adhering to diversification caps—such as no more than 10% exposure to any single issuer, sector limits (e.g., 30 entities maximum for financials in iTraxx Europe), and country restrictions aligned with regional focus (e.g., EU/EFTA/UK for Europe).^[3]^[34] For instance, iTraxx Europe selects 125 entities from this process, with adjustments to maintain balance across sectors like autos/industrials (24-36 entities).^[3] Entities ranked below threshold positions (e.g., #126 for Europe) or those failing ongoing criteria are excluded during rolls.^[33] Weighting within iTraxx indices is equal across constituents to promote balanced exposure and ease of replication. At each roll date, each selected entity's weight is set to 1 divided by the total number of constituents, expressed as a percentage rounded to three decimal places (e.g., 0.800% for 125 entities), with minor alphabetical adjustments if needed to sum precisely to 100%.^[3]^[34] This notional-based approach accounts for varying CDS contract sizes but maintains parity in risk contribution, subject to post-selection tweaks for any interim credit events.^[33] The indices follow a standardized roll schedule to align with on-the-run CDS contracts, typically focusing on 5-year maturities for liquidity. Rolls occur semi-annually on March 20 and September 20 (or the next business day), effective for the subsequent series, with new compositions announced approximately one month prior based on the prior six months' trading data.^[3]^[34] During rolls, distressed or ineligible credits are removed, and replacements are drawn from the Liquidity List or supplementary debt issuer lists to preserve the target number of constituents (e.g., 40 for iTraxx Asia ex-Japan).^[33] This process ensures ongoing representation of the most actively traded names while minimizing disruptions to market participants.^[3]

Calculation and Rebalancing

The iTraxx indices are calculated as the equally weighted average of the credit default swap (CDS) spreads of their constituent reference entities, with the index level quoted in basis points. This spread-based valuation reflects the cost of protection against default for the portfolio of entities, providing a benchmark for credit risk in the respective markets. Daily index levels are determined through mark-to-market processes, where composite quotes from a panel of dealers are aggregated to derive the spreads for each constituent, ensuring liquidity and market representativeness in the computation.^[3]^[9] The mathematical formula for the index spread at time t, denoted IS_t, is given by:

IS_t = \frac{1}{n} \sum_{i=1}^n \text{CDS\_spread}_{i,t}

where n is the number of constituents, and \text{CDS\_spread}_{i,t} is the par spread for the i-th entity derived from the ISDA Standard CDS model, incorporating fixed coupons and upfront payments. Each constituent is weighted equally at $1/n, with the result rounded to three decimal places for precision in trading and settlement. This arithmetic mean approach maintains transparency and simplicity, aligning the index closely with the underlying single-name CDS market dynamics.^[3]^[9] In addition to the standard spread index, performance variants include total return indices, which capture both price appreciation (from changes in index spreads) and carry (from quarterly coupon payments on the CDS contracts), adjusted for credit events and transaction costs. These are computed for a notional funded position, incorporating an overnight rate on the cash collateral to reflect full investment performance. Excess return indices, by contrast, focus solely on the mark-to-market changes and roll costs of the unfunded CDS position, excluding funding returns to isolate credit-specific performance over benchmark rates like SOFR or EURIBOR.^[4]^[9] Rebalancing occurs semi-annually through "rolls" on March 20 and September 20 (or the next business day), transitioning to a new on-the-run series with updated constituents selected based on liquidity and other criteria to ensure ongoing market relevance. During these rolls, the index notional is preserved, but the composition shifts to reflect the most liquid 5-year (and other tenors) CDS contracts, with provisional and final membership lists published in advance. Intra-roll adjustments handle disruptions: in the event of a default, the affected constituent's weight (typically 1%) is removed, reducing the overall notional proportionally, and replaced by the highest-ranked eligible entity from a supplementary liquidity list post-auction settlement; for illiquidity, entities with no trading activity over an eight-week period prior to the roll are substituted using current or supplementary candidates to maintain tradability.^[3]^[9] Since 2020, ESG-filtered variants such as the iTraxx MSCI ESG Screened Europe index have been introduced, applying exclusionary screens to remove entities failing environmental, social, and governance thresholds while following the same calculation and rebalancing procedures as the main series, with a variable number of constituents and a 100 basis point fixed coupon.^[28]

Trading

Over-the-Counter Trading

iTraxx indices are primarily traded over-the-counter (OTC) as unfunded credit default swap (CDS) index contracts governed by the International Swaps and Derivatives Association (ISDA) Master Agreement and the 2014 ISDA Credit Derivatives Definitions, including specific index annexes and confirmations.^[9] These contracts provide protection against credit events in a basket of reference entities, with standard notional amounts of €10 million and the most liquid tenor being five years, though tenors from one to ten years are available depending on the index series.^[9]^[35] Pricing for iTraxx OTC trades is typically quoted as an upfront payment plus a fixed running spread, with investment-grade indices like iTraxx Europe using a 100 basis points running spread and high-yield indices like iTraxx Crossover using 500 basis points; the upfront adjusts based on the index's par spread relative to the fixed coupon.^[9] Upon a credit event affecting a reference entity, settlement can be physical—delivery of defaulted obligations—or cash, determined by an auction process to establish the recovery rate.^[9] Since regulatory mandates under the Dodd-Frank Act took effect in 2013, nearly all iTraxx index trades are centrally cleared through LCH CDSClear or ICE Clear Credit to mitigate counterparty risk; in Europe, EMIR has similarly mandated central clearing for standardized index CDS since 2014.^[36]^[37]^[35] Liquidity in the iTraxx OTC market remains robust, with average daily notional volumes for the iTraxx Europe Main index around €20 billion in the first half of 2025, driven by electronic platforms and interdealer brokers such as GFI Group and Tradition.^[38]^[39]^[40] These volumes reflect the index's role as a benchmark for European credit risk, with trades often executed via swap execution facilities (SEFs) for transparency and efficiency.^[9] In addition to untranched index trades, OTC activity includes tranched products based on iTraxx, which structure synthetic collateralized debt obligations (CDOs) by dividing risk into segments such as equity (0-3% attachment/detachment for investment-grade), mezzanine (3-6%), senior mezzanine (6-9%), senior (9-12%), and super senior (12-22%) tranches.^[9] These tranches allow participants to isolate specific portions of the credit risk spectrum, with standardized terms rolling annually in September and governed by ISDA documentation for consistent trading conventions.^[9]

Exchange-Traded Instruments

In May 2013, IntercontinentalExchange (ICE) launched futures contracts based on the iTraxx indices to provide centralized trading and clearing for credit default swap (CDS) index exposure.^[26] These cash-settled contracts feature quarterly expiries aligned with the underlying index roll dates and are available for the iTraxx Europe Main, Crossover, and HiVol series.^[41] The ICE iTraxx futures contracts are quoted in index points (basis points), with a minimum tick size of 1 index point and a corresponding tick value of €25 per contract.^[41] The contract multiplier is €2,500 times the index level, resulting in a notional value of approximately €100,000 for an index at 40 points, enabling precise hedging of credit risk exposure.^[41] Trading occurs electronically on the ICE platform, with settlement based on the final auction price of the underlying CDS index series. Since 2021, Eurex has offered iTraxx-linked credit index futures, including options on these futures, expanding exchange-traded access to European high-yield and investment-grade credit markets.^[42] These products provide additional liquidity for strategies involving volatility in iTraxx constituents. ETF providers, such as Xtrackers, offer synthetic UCITS ETFs that deliver total return exposure to iTraxx indices like the Crossover 5-year series through swaps, allowing retail and institutional investors to gain leveraged or inverse credit views without direct CDS trading.^[43] Exchange-traded iTraxx instruments mitigate counterparty risk through mandatory central clearing at ICE Clear Credit or Eurex Clearing, contrasting with the bilateral nature of over-the-counter CDS trading. As of September 2025, open interest in Eurex iTraxx credit index futures stood at 28,680 contracts, equivalent to €2.2 billion in notional value, reflecting growing adoption for risk management.^[42]

Market Role

Usage and Applications

iTraxx indices serve as essential tools for market participants in managing credit risk, primarily through hedging strategies that offset exposures in underlying bond or loan portfolios. Banks and corporates frequently buy protection on indices like iTraxx Europe to isolate and mitigate pure credit risk, allowing them to maintain views on interest rates or other factors without credit concerns.^[44] For instance, an investor holding a diversified European corporate bond portfolio can purchase iTraxx Main protection to hedge against widespread credit deterioration, effectively transferring default risk to counterparties while preserving liquidity and standardization benefits.^[11] Beyond risk mitigation, iTraxx facilitates speculation by enabling directional bets on credit spreads through long or short positions in the index. Traders express macroeconomic views on credit conditions by selling protection to bet on tightening spreads or buying it to anticipate widening, leveraging the indices' high liquidity for efficient entry and exit.^[44] Arbitrage opportunities arise between the index and its single-name constituents, where discrepancies in pricing allow for relative value trades, such as going long the index and short underperforming single-name CDS to capture mispricings.^[44] In investment contexts, iTraxx supports basis trades that exploit spreads between the index and cash bonds or single-name CDS, enabling investors to profit from temporary divergences while maintaining market-neutral positions. Funds restricted from direct CDS access use these indices for synthetic exposure, replicating the economic effects of bond holdings without physical ownership, which aids in tactical portfolio adjustments.^[44] This approach is particularly valuable for large-scale positions, as it avoids disrupting underlying bond markets.^[45] iTraxx tranche applications extend these uses by allowing tailored exposure to segments of the index's loss distribution, aiding in the modeling of tail risks within structured credit products. Investors buy or sell specific tranches, such as equity or senior slices, to hedge extreme default scenarios or speculate on portfolio correlations.^[44] Correlation trading between tranches, for example, involves positioning across equity and mezzanine layers to bet on changes in implied default dependencies among constituents, providing insights into systemic credit risks.^[11]

Impact on Credit Derivatives

The iTraxx indices serve as a primary liquidity benchmark in the European credit default swap (CDS) market, driving a substantial portion of trading activity and standardizing pricing for underlying single-name CDS contracts. In the first quarter of 2025, iTraxx Europe accounted for 65.3% of EU-reported CDS traded notional, amounting to $0.5 trillion, while iTraxx Europe Crossover contributed an additional 13.3%, making index CDS—including iTraxx—the dominant segment at 89% of total European CDS notional. This concentration enhances market efficiency by providing a liquid reference point for pricing individual corporate credits, as the equal-weighted composition of iTraxx allows for arbitrage opportunities that align single-name spreads with index levels.^[46] Changes in iTraxx spreads act as a key market signal for broader economic sentiment, often widening in response to inflationary pressures or uncertainty. For instance, during the 2022 inflation surge, iTraxx Europe spreads expanded significantly, reflecting heightened credit risk perceptions amid rising interest rates and energy shocks. Additionally, iTraxx exhibits notable correlation with equity indices such as the Euro Stoxx 50, with empirical analyses showing cross-market factor linkages that amplify during periods of volatility, enabling investors to gauge systemic risk transmission between credit and equity markets.^[47] In the regulatory domain, iTraxx data underpins stress testing frameworks, particularly those of the European Central Bank (ECB), by modeling credit risk scenarios and enhancing post-2008 transparency reforms. The ECB's 2025 solvency stress test incorporated iTraxx Europe levels in its adverse scenario, projecting a rise from 168.0 to 283.2 basis points by 2027 to simulate tighter financial conditions from geopolitical tensions, contributing to a 1.3 percentage point depletion in banks' CET1 ratios via fair value and counterparty losses. Post-financial crisis G-20 reforms, including mandatory clearing and reporting for CDS, have leveraged iTraxx's standardized index data to improve market oversight and reduce opacity in credit derivatives.^[48]^[22] Globally, iTraxx complements the U.S.-centric CDX indices, fostering integration across credit markets while exerting growing influence in Asia amid 2025 monetary easing. Joint iTraxx-CDX products, such as investment-grade steepener and flattener indices, enable cross-regional hedging of credit curves, with both benchmarks together representing the core of international CDS liquidity. In Asia, the iTraxx Asia ex-Japan index saw spreads widen by 26 basis points in early 2025, signaling regional spillovers from global trade tensions even as central banks implemented rate cuts to support growth.^[49]

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iTraxx Asia ex-Japan - Indices - S&P Global
The iTraxx Asia ex-Japan Indices include 40 liquid credit default swap names across Asia-Pacific markets, excluding Japan. The indices primarily track ...
[19]
Markit says buys IIC, agrees to buy CDS IndexCo | Reuters
Nov 14, 2007 · Markit said the acquisitions would help it expand its index products into new asset classes such as interest rate derivatives, foreign exchange ...
[20]
Markit Buying Owners of iTraxx, CDX Credit Indexes - Bloomberg.com
Nov 14, 2007 · Markit Group Ltd. agreed to buy the owners of the iTraxx and CDX credit-default swap indexes, giving it control of the benchmarks for the ...Missing: Partners | Show results with:Partners
[21]
Markit completes acquisition of CDS IndexCo - Finextra Research
Nov 20, 2007 · Markit announced an agreement to acquire CDS IndexCo last week in addition to its acquisition of International Index Company ("IIC"), ...Missing: history developments
[22]
[PDF] Evolution of OTC Derivatives Markets Since the Financial Crisis
credit derivatives traded notional, while iTraxx Europe accounted for 17.3%26. IRD traded notional in the. US increased to. $143.9 trillion in the first half.
[23]
[PDF] Clearing Requirement Determination Under Section 2(h) of the CEA
Nov 29, 2012 · For broadly traded swaps like the CDS indices, the ultimate impact ... supported the inclusion of iTraxx CDS indices in the clearing requirement.
[24]
[PDF] Credit default swaps – analysis and policies
While the UK EMIR was incorporated into UK law and currently mirrors the EU. EMIR in its impact on CDS instruments, one significant area of divergence.
[25]
IntercontinentalExchange Announces May Launch of Credit Index ...
Mar 11, 2013 · IntercontinentalExchange Announces May Launch of Credit Index Futures Contracts ... NEW YORK , March 11, 2013 /PRNewswire/ -- ...
[26]
Markit To Acquire CDS IndexCo - GlobalCapital
Nov 14, 2007 · In addition, Markit has recently acquired International Index Co. IIC owns the ITraxx Europe and iTraxx Asia credit derivative indices as well ...<|separator|>
[27]
S&P Global Completes Merger with IHS Markit, Creating a Global ...
Feb 28, 2022 · 2022 guidance: The Company is initiating 2022 guidance with GAAP projected revenue growth of over 40%, margin expansion of approximately 260 ...
[28]
[PDF] iTraxx MSCI ESG Screened Europe Series 40 Version 1 - S&P Global
Jul 18, 2025 · These materials, including any software, data, processing technology, index data, ratings, credit-related analysis, research, model, ...Missing: methodology | Show results with:methodology
[29]
IHS Markit and MSCI announce ESG index partnership - ETF Strategy
Feb 5, 2020 · IHS Markit and MSCI have announced a collaboration in which IHS Markit will apply MSCI's environmental, social, and governance (ESG) ...
[30]
iTraxx Europe - Indices | S&P Dow Jones Indices
The flagship iTraxx Europe Index tracks 125 investment grade entities, while the iTraxx Crossover Index focuses on sub-investment grade credit risk through ...
[31]
[PDF] Eurex iTraxx® Credit Futures
Sep 14, 2025 · ... introduction of the iTraxx® index family, developed by International Index Company in 2004. With the launch of its new iTraxx® Europe. Index ...
[32]
[PDF] iTraxx Asia ex-Japan Index Rules June 2025 - S&P Global
IHS Markit Credit Indices are made up of the most liquid entities in the relevant single-name CDS market. The indices roll on a semi-annual basis, ...
[33]
[PDF] iTraxx Japan Index Rules June 2025 - S&P Global
Jun 20, 2025 · The iTraxx Japan Index is a tradable index that allows market participants to take a view on the overall credit quality and direction of the ...
[34]
New Opportunities in ESG CDS Trading - NordSip
Jun 17, 2020 · ... iTraxx MSCI ESG Screened Europe Index available for trading. Launched in March 2020, this European corporate ESG CDS index is the first of ...Missing: filtered | Show results with:filtered
[35]
[PDF] Analysis of the trading book hypothetical portfolio exercise
Equivalent of short 1 million notional per single-name 5 year CDS (total €10 million notional) ... Short €10 million notional iTraxx 5-year Europe index Series 20 ...
[36]
CFTC Issues Clearing Determination for Certain Credit Default ...
Nov 28, 2012 · The Commodity Futures Trading Commission today issued new rules to require certain credit default swaps (CDS) and interest rate swaps to be cleared.
[37]
What We Clear - LCH CDSClear - LSEG
CDSClear is uniquely positioned with its product coverage to clear index basis packages (index arbitrage) across iTraxx® Main, Crossover, Senior Financials, ...
[38]
[PDF] Credit Derivatives Trading Activity Reported in EU, UK and US Markets
European CDS traded notional rose by 39.2% to $5.5 trillion in the first half of. 2025 compared to $3.9 trillion in the first half of 2024. 77.4% of CDS traded.Missing: average daily
[39]
[PDF] CREDIT DERIVATIVES iTraxx Index Credit Default Swaps - GFI Group
May 16, 2023 · Rolls and Curves are charged on the longer dated leg only. Switches: EUR/XO and EUR/Snr are charged on the XO leg and Snr leg only.
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[PDF] LCH CDSClear Q2 2025 highlights - LSEG
Record average daily volume in EU and US indices. − USD CDX™ and iTraxx® indices average daily volume (ADV) of US$13bn (June 2025. YTD), up 323% vs June 2024 ...
[41]
[PDF] ICE US Rule Submission, May 22, 2013
May 22, 2013 · Nineteen (19) index series for the Markit iTraxx Europe Crossover have been created. (as of March 2013). More detailed information regarding the ...
[42]
Trade Credit Index Futures at Eurex
Our Credit Index Futures markets are transparent and benefit from a diverse set of liquidity providers, ensuring narrow on-screen prices and off-book trades.Missing: iTraxx ICE
[43]
Xtrackers iTraxx Crossover Short Daily Swap UCITS ETF 1C - justETF
The iTraxx Crossover 5 Year Short index tracks the inverse performance of iTraxx Crossover 5 Year index on a daily basis.
[44]
[PDF] Eurex Credit Index Futures
Oct 1, 2025 · ITRAXX CROSSOVER (EUR HY). Sell and Buy Protection for EURO HY ... (ESG) fixed income indices (the “ESG Indices”). Neither Bloomberg nor ...
[45]
[PDF] CDS Indices Primer
• Index Tranche Trading: Tranched index trading allow one to tailor exposure to specific segments of the index loss distribution. Tranche trading in general ...
[46]
[PDF] The Impact of the FRTB on Correlation Trading
Oct 1, 2025 · Enables efficient large portfolio trading: Permits investors to take or hedge large credit positions without disrupting underlying bond markets.
[47]
[PDF] Credit Derivatives Trading Activity Reported in EU, UK and US Markets
European CDS traded notional rose by 28.0% to $3.0 trillion in the first quarter of 2025 compared to $2.3 trillion in the first quarter of 2024. 75.4% of CDS.Missing: average daily
[48]
Synthetic credit in 2022 and beyond | S&P Global
Dec 22, 2022 · We mentioned above that spreads have widened this year, and both the CDX IG and iTraxx Europe (also known as Main) are trading at levels in ...Missing: sentiment | Show results with:sentiment
[49]
[PDF] 2025 stress test of euro area banks – Final results
ECB Banking Supervision has concluded its 2025 solvency stress test for euro area significant institutions.1 A total of 51 significant institutions directly.
[50]
Global credit starts to wobble as market pain spreads | Reuters
Apr 7, 2025 · Asia Itraxx CDS spreads widen by 26 bps; Sovereign CDS in Asia widen; US IG credit spreads + 20bps since April 2. SINGAPORE/LONDON, April 7 ...