Deutsche Börse, in partnership with five of the biggest European banks, has set out its bid to provi...
Deutsche Börse, in partnership with five of the biggest European banks, has set out its bid to provide the undisputed European bond index.
By the second quarter of this year, the independent information distributor will provide real-time price listings for European government bonds.
These will eventually be joined by actively-traded, non-government, high grade bonds and, finally, the less liquid vehicles will be added.
Christoph Lammersdorf, the Deutsche Börse executive board member responsible for the group's index business, said: "This is the first time a neutral provider of information products is offering a real-time index family in co-operation with leading international houses in the fixed income market.
"The markets need a multi-contributor, rule-based index and, by combining Deutsche Börse and Europe's leading fixed income players, the partners will be creating a widely accepted, liquid, investible and transparent benchmark for Europe."
The indices are an extension of Deutsche's Box family of indices, in conjunction with ABN Amro, BNP Paribas, Deutsche Bank, Dresdner Bank and Morgan Stanley Dean Witter.
The size of the group will be jealously guarded to maintain the integrity and focus of the project.
There are no plans to introduce more partners into the deal and such expansion would only be considered if a prospective partner could show it could contribute in an area that was not adequately covered.
The partners provide OTC prices for each listed bond. This is combined with information from Eurex and the electronic trading system Xetra to produce what are hopefully the most accurate prices.
The real-time price service, which will be provided by direct link to customers, will eventually cover all bonds in the Box series, allowing the creation of intermarket and intersector spreads and rating yield curves. When the indices are launched, there will be a five-year price history programmed into them.
The Box family was launched by Deutsche Börse in 1999 and formed the basis of a generation of fixed income products. It is hoped that this new project will cause a similar cascade of products. To encourage this, the generation of these indices is being kept transparent.
The indices will be rule-based, replicable and based on real-time market prices.
In taking this direction, Deutsche Börse will be creating the first multi-contributor index for euro-denominated bonds. If the company can persuade investors to take these new indices as the defining standards, the euro-denominated bond markets should become more easily accessible.
Liquidity should also see a boost because, at the moment, only a few participants have access to detailed market information.
Lammersdorf said: "Part of Deutsche Börse's mission statement is to increase the liquidity of the German capital markets."
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